Cut the government 3

We hold personal liberty to be the highest value, which is why we are sympathetic to libertarianism.

One of our favorite libertarians  is John Stossel, who writes today at Townhall:

When Congress and President Obama agreed on a deal last week to raise the debt ceiling and resume government spending, people reacted as if a disaster was averted — instead of reacting as if a disaster had resumed. It has. And it continues.

Congratulating ourselves for raising the debt ceiling once again, the way we do every time this drama plays out, is like congratulating an alcoholic for talking the bartender out of cutting him off.

As with alcoholics, there’s a deeper problem here. It’s not just that America is addicted to debt. Everyone agrees we should pay our bills, just not when or how. The deeper addiction is to government.

For most of the history of America, federal spending never took up more than 5 percent of the economy. Spending increased during wars, but after World Wars I and II, spending dropped back to prewar levels.

Then came Presidents Johnson and Nixon and the “great society.” From then on, spending rose even in peacetime. Now, if you include local government, government spending makes up more than 40 percent of the economy.

When Obama campaigned for the presidency, he … complained, “The way Bush has done it over the last eight years is to take out a credit card from the bank of China. … We now have over $9 trillion of debt that we are going to have to pay back. … That is irresponsible.”

I agree! $9 trillion in debt is totally irresponsible. That makes it all the more remarkable that just a few years later, under President Obama, debt increased to $17 trillion. But now, suddenly, this vast debt is no longer irresponsible. Today the president says what is irresponsible is for Congress not to constantly raise the debt ceiling.

Let me make some suggestions: Eliminate NPR and PBS funding. Cut foreign aid. End the war on drugs. Kill Fannie and Freddie, which financed America’s mortgages and helped cause the financial crisis. Eliminate cabinet departments like Commerce, Energy, Agriculture and Education, all activities that happen without any need for the federal government. (Education is a local function, and the department spending $100 billion a year hasn’t raised test scores one bit.)

Oh yes, all those should go.

Reform Social Security by raising the retirement age.

Or phase it out altogether, we would suggest.

And instead of increasing government involvement in health care, turn Medicare into a self-sustaining insurance program.

But with his next suggestion we do not entirely agree. It is a point on which we diverge from our libertarian friends:

Shrink the military by reducing our overseas commitments. …

We do not want to see a shrunken military (although we do think many of the soldiers stationed abroad – in Western Europe for instance – should be brought home*). We think much more should be spent on defense – and preparation for wars abroad that may very well become necessary. (Why not robot armies?)

We are emphatically against the “Responsibility to Protect” resolution of the UN (for which Samantha Power, the present US ambassador to that corrupt and ridiculous institution, was the inspiring muse). America has no responsibility to be the world’s policeman. But aggression against us – by the mullahs of Iran, for instance – should be met with overwhelming counter-force. No absurd notions of “proportionality” should ever be entertained.

But to return to domestic woes – John Stossel makes another suggestion:

To save America from bankruptcy … we could grow our way out of debt if Congress simply froze spending. They won’t do that either, but if they limited spending growth to 2 percent per year, we could balance the budget in just three years.

And he ends on a dramatic note with words that ought to be read not as a mere rhetorical flourish but as a real warning:

Limiting government growth is politically difficult, but if we don’t do it, America is doomed.

 

*Footnote: From Wikipedia: “The military of the United States is deployed in more than 150 countries around the world, with 172,966 of its 1,372,522 active-duty personnel serving outside the United States and its territories.” See the list.

US economy “hanging by a thread” 8

“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. 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 and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.” – Barack Obama in 2006.

This is by Arnold Ahlert, from Front Page:

The rollout of ObamaCare and the subsequent government shutdown have engaged the attention of millions of Americans. Unfortunately, both issues are inconsequential compared to what will likely be another battle over raising the debt ceiling. Even more unfortunately, most Americans have little grasp of the economic issues that have brought us to the precipice for the second time in two years.

Most Americans do know the nation is $16.7 trillion in debt, but far fewer understand the implications of such debt. In fact, precious few Americans even know which nation underwrites more of our debt than any other. The overwhelming majority believes it is either China or Japan. The overwhelming majority couldn’t be more wrong. The largest underwriter of U.S. debt is the United States of America, courtesy of the Federal Reserve.

The Fed’s Keynesian-economics-on-steroids buying spree is called “Quantitative Easing” (QE). It consists of spending $85 billion per month, with no end in sight. Of that total, $40 billion is spent on mortgage-backed securities and $45 billion on longer-term Treasury securities.

Where does the Fed get the money to buy these securities? It “prints” money to buy them. To put this in household terms, the Fed is essentially paying down one credit card – by charging it to another credit card. During the Obama administration, QE, along with Congress spending additional revenue we don’t really have, has increased the national debt by an additional $6 trillion. QE has also debased the currency, since creating more currency makes each piece of currency worth less – on the way to becoming worthless.

The Fed has coupled this idea with a Zero Rate Interest Policy (ZIRP), thoroughly convinced that both agendas will “stimulate” the economy, because borrowing money is cheap, and the new money has to go somewhere. That “somewhere” has been the stock market, which has been pushed to record highs as a result. Fed Chairman Ben Bernanke and his fellow Keynesians believe that pumping up the market will result in a “trickle down” effect, as those Americans who feel wealthy with regard to their stock portfolios will spend money and create new jobs. The Fed has pursued QE in one form or another for five years.

During those same five years, the official unemployment rate has never dipped below 7.4 percent, according to the Bureau of Labor Statistics (BLS). That number is a fraud because it fails to acknowledge that we have lowest workforce participation rate in 35 years, and BLS doesn’t count the people who have given up looking for work as unemployed. If the workforce participation rate were the same as it was just before the financial crisis hit in 2008, the unemployment rate would be approximately 11.3 percent.

Furthermore, despite the nation being in a so-called recovery since 2009, we have record numbers of Americans receiving food stamps, record numbers collecting disability checks, and a record number of Americans living in poverty. Americans’ annual household income has also declined by 4.4 percent during the recovery, which is worse than the 1.8 decline that occurred during the recession.

As for inflation, the Fed claims it is under control. Americans might argue otherwise, considering the reality that food and fuel prices have gone up substantially under this administration. Yet many of those same Americans are unaware of the reality that food and fuel prices are not included when the government calculates the inflation rate. …

In short, the Fed’s QE approach is nothing less than disastrous. … It has engendered a monstrous amount of national debt, fueled by the record-setting, trillion dollar-plus annual deficits needed to pay for it. And despite the Fed’s money printing prowess, even they can’t pony up the kind of revenue necessary to underwrite the entire effort.

Thus we tax, and we do borrow from other nations.

On the tax side of the equation, those who pay them have done yeoman’s work. For the first 11 months of FY2013, the federal government received a record-setting $2.47 trillion in revenues. Yet they spent all of it, plus an additional $755 billion during the same period. Thus, on the borrowing side of the equation, we are constantly adding to our national debt, and have again “maxed out” our spending limit, reaching the so-called debt ceiling.

Yet even as we constantly bump up against a new debt ceiling, we continue paying interest on the debt we’ve already accumulated. In 2012, the interest on that debt totaled $360 billion. Like the minimum payment on a household credit card, that massive amount of spending does nothing more than maintain the debt at its present levels. Nothing is being paid down.

The average interest rate the Treasury paid on U.S. debt over the last 20 years is 5.7 percent. Americans might tolerate paying 7 percent of every dollar collected just for interest, but what about 10 percent, or 20 percent – or more? Not for more Social Security, Medicaid, Medicare, military, or any other government program. Just interest. Just to maintain. How many American families could sustain themselves if 20 percent of their income or more did nothing but keep their credit card debt right where it is now? And 20 percent may be an optimistic number. …

An American politician vividly expressed the consequences of continually raising our borrowing limit and accumulating more debt as a result:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure,” he said. “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. … 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 and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.

That politician was Barack Obama in 2006.

Barack Obama in 2013? ”Raising the debt ceiling, which has been done over a hundred times, does not increase our debt; it does not somehow promote profligacy.” Except that it does. Every time we have raised the debt ceiling, our debt level has increased.

Thus, “insane” Republicans are demanding concessions for raising the current debt ceiling. Those concessions include a one year delay of the new and massively expensive (more than triple its original cost estimate) healthcare bill, a blueprint for tax reform, medical malpractice reform, approval of the Keystone pipeline, and an increase in offshore drilling for energy. The president’s Twitter response is telling. ”I won’t negotiate on anything when it comes to the full faith and credit of the United States of America.”

Due to unprecedented levels of government spending by both parties … the full faith and credit of the United States of America is hanging by a thread. Either we stop engaging in that insanity or we are finished as a nation. Politicians lie. Math does not.

What is the point of calling it “the debt ceiling” if it is continually being raised? For the Left, the sky’s the limit.

And if another Alinskyite socialist, another incompetent, another affirmative action candidate, another economics illiterate – such as Hillary Clinton – is elected to the presidency in 2016, the thread will surely snap.

Posted under Commentary, Economics, United States by Jillian Becker on Thursday, October 3, 2013

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