2nd Mar, 2010

SKY-HIGH SPENDING, ESCALATING BUDGET DEFICITS AND MOUNTING GOVERNMENT DEBT—— Trillions of Reasons to Oppose the Status Quo in Washington (Part III and IV)

PART III

“THE ONLY WAY TO KEEP GOVERNMENT FROM GROWING IS TO QUIT FEEDING IT” — Ronald Reagan

Today’s majority in Washington are willing to use deficit spending and the national debt to avoid tough decisions, which are often unpopular.  Resorting to more borrowing instead of making difficult but necessary budget cutting decisions provides the short-term cover and avoidance of political unpopularity that seems to be forever on their mind. The current uprising among the people, however, is beginning to blow that cover.  That is a positive development with great potential if it can be channeled into the corrective measures we sorely need at this time.

President Ronald Reagan said, “The only way to keep government from growing is to quit feeding it.” He pushed for the power of an executive “line item veto,” which he was able to use as Governor of California. When the Republicans took control of Congress in 1994, they tried to create and adopt such an added check and balance on Federal spending but the U.S. Supreme Court struck down that action.  Thus, today, we are left with outrageous “earmarks” (such as $200 million for an indoor tropical rain forest in Iowa) and the clever and less than transparent insertion of unrelated items into various Bills. This is shrewdly done to ensure passage and avoid a principled debate on the individual merits of such proposals.  (President Obama and the Democrat majority did that again recently to further their “sexual orientation” agenda.  They inserted unrelated “hate crimes” legislation into the military defense budget.  See prior post on this site in the archives, November 12, 2009).

LOPSIDED ADVANTAGE AND PERPETUATION OF POLITICAL INCUMBENTS THROUGH MULTI-MILLION DOLLAR CAMPAIGN FUNDS RECEIVED FROM LOBBYISTS AND SPECIAL INTERESTS

We have also witnessed the proliferation of a PAC system of financing political campaigns.  This compromises the entire process of elected representation.  Senators and members of Congress run multi-million dollar campaigns and maintain multi-million dollar balances in their campaign accounts.  This comes from campaign contributions by those same special interests that lobby fervently year round for their ear and support.  Opposition candidates fade away in the face of the lopsided funding advantages that incumbency provides.

There are serious questions about how incumbents are able to use and even later keep their campaign funds after they leave office.  It seems inconceivable that the personal wealth of an elected full time representative in Washington could actually increase and be higher when they leave public office than when they left the private sector and were first elected. The current system is flawed and unable to fully answer such concerns.  At the same time, we gratefully acknowledge those who serve at great sacrifice.  That is the spirit and legacy of the Founders of our nation.

“TAX AS YOU GO” —THE “PAY AS YOU GO” ILLUSION OF FISCAL RESPONSIBILITY IN WASHINGTON

There is a very misleading notion advanced by certain Democrats in Congress who identify with their liberal party but also want to appease large conservative voting blocks back home.  They call themselves “Blue Dogs”.  They advocate something called “pay as you go.” This is an approach to budgeting that purports to ensure that new tax cuts or new spending programs will not increase deficits.  This sounds prudent but is actually just a veiled form of guaranteeing that government WILL grow and taxes WILL increase to suit whatever unlimited government expansion ideas may arise from members of Congress and Senators who feel the need to continually offer something to their constituency back home.

The “paygo” group are not committed to cutting taxes or shrinking government.  Rather, they are willing to endlessly increase spending as Congress did again this year by $300 billion to fund its continued growth.  The only difference is that they do not want it to come in the form of deficit spending. They want balanced budgets but are fine with unlimited tax increases to artificially achieve that end. They also block tax cuts while insisting that government expenditures must simultaneously decrease.  (They know that when it comes to spending cuts — there are no volunteers).

The “paygo” mirage only applies their claim of fiscal restraint to new proposals. They offer nothing to address the bloated status quo and they exempt so many programs that it serves little purpose other than providing political cover for liberals who hope to be viewed as “fiscal conservatives” back home in their District.

This is where principle must step in.  Ronald Reagan had faith in the American people and the principle that lower taxes enable people to keep more of their money. This results in increased personal investment, spending, employment and a truly stimulated economy.  We witnessed the fruits of that principled approach in the prosperity that flourished for more than 25 years following the Reagan presidency.  What caused the national debt to increase during the Reagan years was the need to also continue fighting the “Cold War” and build up the military.  This ultimately brought down the “Iron Curtain” and the Soviet Union.   This produced the “peace dividend” that President Clinton later used to create a budget surplus through reductions in defense spending. (He also raised taxes).  Those who criticize the level of spending during the Reagan years fail to recognize that most of the increases came in the entitlements, such as Social Security, Medi-care and Medicaid, which were written into the permanent law by Congress and never crossed the President’s desk.  (Hamilton’s Blessing, p. 166).

President George W. Bush ushered in tax cuts following 9/11.  This again stimulated the economy but we again had to increase military spending in the face of terrorist attacks and national concerns centered in Iraq, Afghanistan and elsewhere.  Still, we can take heart and instruction from what the Reagan era teaches us. He said, “Common sense told us that when you put a big tax on something, the people will produce less of it.  So we cut the people’s tax rates, and the people produced more than ever before.”

The Obama Administration wants to take us backward and not forward.  However, the Carter and Clinton approach are not a desirable “U-Turn” for America.

PART IV

WHERE DO WE NOW STAND?

Where do we now stand?  The current debt ceiling is $12.4 trillion and climbing.  $1.6 trillion in new debt has been added this year. That is an unprecedented increase.  Is that really “change we can believe in?” In evaluating all proposed government handouts, bailouts and sellouts in Washington, there are two fundamental questions that must always be asked: Who benefits? And who pays? (Running on Empty, p. 177-178).  Things in Washington are moving in the wrong direction.  If you look back at the Federal budget from George Washington through Dwight Eisenhower and exclude only the years of declared war or catastrophic depression, the record is quite remarkable.  127 years of budget surpluses and 44 years of budget deficits.  Even those deficits, on average, were less than 0.5% of the gross domestic product (GDP) in America.  However, since 1960, the record has changed dramatically. There have been just five years of surplus and 39 years of deficits.

What has changed?  It is the “entitlement revolution” (monies paid without limit to anyone who qualifies for the government program).  This has dramatically impacted the Federal budget. As one writer has noted:

“First came the law.  Then, once the money began flowing out of  Washington, came the lawyers, the lobbies, the subcommittees, the constituent phone calls, the expert witnesses, the press conferences, the bound reports and the campaign slogans for the next election.  Very soon you had a program that no politician dared to touch.” (p.180).

SHARED VALUES AND THE AMERICAN COMMUNITY

America is at risk of losing its precious common bond of shared citizenship by yielding to moral relativism, radical individualism and unrestrained self-interest. This threatens to cause the “collapse of American community.” (p. 189). “Notions of victimization and redress [can come to replace] the idea of the common good as our defining link of citizenship.” (p. 179).  There is a generational shift underway regarding moral values and civic engagement, which does not bode well for our country.   A 2004 report shows that less than 25% of adults under the age of 35 voted in “off-year” congressional elections—versus 60% of adults aged 65 and over.  (p. 191).

The Congressional budget process is very complex and jumbled.  Committees are expected to provide leadership to the point that the body of individual representatives ultimately vote on Bills they have not fully read, digested or understood.  Congress votes on spending and revenue targets in the early Spring and then votes again on final budget Bills in the late Fall in time for the new fiscal year.  That is the theory but in practice, it does not run smoothly.  Time tables are often missed and vast spending bills are rushed to a last minute vote in the dead of night as “Omnibus measures”.  Then, as needed, there are scattered “continuing resolutions” to keep government from shutting down while politicians continue to debate and argue with an eye on the calendar and a desired recess or vacation.

THE NEED FOR A MORE PRINCIPLED APPROACH TO TAXATION AND THE PRICE OF GOVERNMENT

The lack of restraint and a more principled approach to taxation and spending has “turned the Federal Government into a massive entitlement spending machine, which operates by dispensing new benefits in return for organized political support and by deferring costs as far as possible into the future.”  (p. 18).

The minutia and complexity of all this is a serious shortcoming in our government today.  Thomas Jefferson explained that self government works when people are well informed but how can the citizenry be well informed when the process seems to leave the people disengaged and uninformed and when their elected representatives are so often conflicted or compromised by the reelection process?  To his Treasury Secretary, Jefferson wrote:

“We might hope to see the finances of the union as clear and intelligible as a merchant’s books, so that every member of Congress, and every man and every mind in the Union, should be able to comprehend them, to investigate abuses, and consequently to control them”. (Running on Empty, p.214).

Jefferson’s description does not fit today’s Congress nor the budget and national debt, which they control.

*(CONTINUED IN PART V)*

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