—
–
Everything You Need to Know about Fixing the Budget Mess in Washington
The 21st century has been bad news for proponents of limited government. Bush was a big spender, Obama was a big spender, Trump was a big spender, and now Biden also wants to buy votes with other people’s money.
That’s the bad news.
The good news is that there is still a simple solution to America’s fiscal problems. According to the just-released Budget and Economic Outlook from the Congressional Budget Office, tax revenues will grow by an average of 4.2 percent over the next decade. So we can make progress, as illustrated by this chart, if there’s some sort of spending cap so that outlays grow at a slower pace.
The ideal fiscal goal should be reducing the size of government, ideally down to the level envisioned by America’s Founders.
But even if we have more modest aspirations (avoiding future tax increases, avoiding a future debt crisis), it’s worth noting how modest spending restraint generates powerful results in a short period of time. And the figures in the chart assume the spending restraint doesn’t even start until the 2023 fiscal year.
The main takeaway is that the budget could be balanced by 2031 if spending grows by 1.5 percent per year.
But progress is possible so long as the cap limits spending so that it grows by less than 4.2 percent annually. The greater the restraint, of course, the quicker the progress.
In other words, there’s no need to capitulate to tax increases (which, in any event, almost certainly would make a bad situation worse).
P.S. The solution to our fiscal problem is simple, but that doesn’t mean it will be easy. Long-run spending restraint inevitably will require genuine reform to deal with the entitlement crisis. Given the insights of “public choice” theory, it will be a challenge to find politicians willing to save the nation.
P.P.S. Here are real-world examples of nations that made rapid progress with spending restraint.
P.P.P.S. Switzerland and Hong Kong (as well as Colorado) have constitutional spending caps, which would be the ideal approach.
Schumer Is Wrong About Debt. Congress Must Take Debt Danger Seriously, Not Spend Recklessly.
The combination of unified control of the federal government along with the COVID-19 pandemic has seemingly caused some elected officials to think there are no consequences to new spending proposals. However, they must wake up to the dangers posed by recklessly adding to the national debt.
On Thursday, Majority Leader Charles Schumer, D-N.Y., exemplified this mindset by saying, “The dangers of undershooting our response are far greater than overshooting it. We should have learned the lesson, from 2008 and 2009, when Congress was too timid and constrained in its response to the global financial crisis.”
>>> What’s the best way for America to reopen and return to business? The National Coronavirus Recovery Commission, a project of The Heritage Foundation, assembled America’s top thinkers to figure that out. So far, it has made more than 260 recommendations. Learn more here.
This is wrong on several fronts.
The Left has declared war on our culture, but we should never back down, nor compromise our principles. Learn more now >>
First, the stimulus spending that took place in the wake of the Great Recession was ineffective at creating jobs, and in some ways slowed the economy by creating perverse incentives and crowding out private activity.
Second, despite the difficulties associated with the pandemic, the economy is currently in much better shape than it was during the last recession.
The national unemployment rate hit 10% in October 2009 and stayed above 8% through August 2012. In contrast, the COVID-19 recession caused unemployment to spike to 14.8% in April 2020, but it fell below 7% by October.
Third, Congress has already approved over $4 trillion in response to the pandemic, much of which is still available or in the process of being distributed. The idea that Congress has been “undershooting” the response is ridiculous.
Most importantly, Schumer and other leftists in Congress are ignoring the very real danger posed by adding to the $27.8 trillion federal debt, which is over $210,000 for every U.S. household.
Even after the pandemic is over and the economy returns to normal, we will face serious problems as a result of the federal government’s broken finances.
Over $21 trillion worth of federal debt obligations are traded on the open market. While interest rates are low today, Congress has no control over what those rates will be as the debt turns over and requires refinancing.
Credit rating agencies are growing concernedabout the sustainability of America’s finances. If demand for our debt goes down, that will force the Treasury to offer higher interest rates.
Higher interest rates on so much debt would add up very quickly, which makes this a serious risk to economic growth and future prosperity. That means we need to put an end to massive deficits and eventually shrink the debt, either in absolute terms or in relation to the size of the economy, to reduce the risk to current and future generations.
This will be impossible unless legislators address the driving force behind long-term debt and deficits: unsustainable benefit programs such as Social Security and Medicare.
Major trust funds will run dry all too soon. Medicare Part A (hospital insurance) goes broke in 2024, Social Security Disability Insurance in 2026, and the Social Security retirement fund in 2031. These are programs that tens of millions of people rely on, and trust fund insolvency would cause serious upheaval, especially for Social Security.
Annual deficits for the federal government and these major benefit programs are too large to close overnight. Deficits were already high during the years of strong economic growth prior to the pandemic, and then exploded in 2020.
Reforms aiming to slow the growth of spending on Social Security and Medicare can have a significant effect, but only if those reforms are in place several years before the trust funds run out. The longer we wait, the more drastic the necessary changes become.
Besides reforming large benefit programs, there are many other ways for Congress to improve the nation’s financial health. These include refocusing the federal government on core priorities, eliminating wasteful spending, returning to a regular budget process, and strengthening economic growth.
What would not help this massive and growing problem is spending trillions of dollars we don’t have on more “relief” legislation that would do little to help the economy. Hopefully Congress will come to its senses and recognize that it has a responsibility to use taxpayer dollars wisely.
Have an opinion about this article? To sound off, please email letters@DailySignal.com and we will consider publishing your remarks in our regular “We Hear You” feature.
—-
March 31, 2021
President Biden c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500
Dear Mr. President,
Please explain to me if you ever do plan to balance the budget while you are President? I have written these things below about you and I really do think that you don’t want to cut spending in order to balance the budget. It seems you ever are daring the Congress to stop you from spending more.
“The credit of the United States ‘is not a bargaining chip,’ Obama said on 1-14-13. However, President Obama keeps getting our country’s credit rating downgraded as he raises the debt ceiling higher and higher!!!!
Washington Could Learn a Lot from a Drug Addict
Just spend more, don’t know how to cut!!! Really!!! That is not living in the real world is it?
Making more dependent on government is not the way to go!!
Why is our government in over 16 trillion dollars in debt? There are many reasons for this but the biggest reason is people say “Let’s spend someone else’s money to solve our problems.” Liberals like Max Brantley have talked this way for years. Brantley will say that conservatives are being harsh when they don’t want the government out encouraging people to be dependent on the government. The Obama adminstration has even promoted a plan for young people to follow like Julia the Moocher.
David Ramsey demonstrates in his Arkansas Times Blog post of 1-14-13 that very point:
Arkansas Politics / Health Care Arkansas’s share of Medicaid expansion and the national debt
Posted by David Ramsey on Mon, Jan 14, 2013 at 1:02 PM
- Mark Herreid
- Baby carrot image via Shutterstock
Imagine standing a baby carrot up next to the 25-story Stephens building in Little Rock. That gives you a picture of the impact on the national debt that federal spending in Arkansas on Medicaid expansion would have, while here at home expansion would give coverage to more than 200,000 of our neediest citizens, create jobs, and save money for the state.
Here’s the thing: while more than a billion dollars a year in federal spending would represent a big-time stimulus for Arkansas, it’s not even a drop in the bucket when it comes to the national debt.
Currently, the national debt is around $16.4 trillion. In fiscal year 2015, the federal government would spend somewhere in the neighborhood of $1.2 billion to fund Medicaid expansion in Arkansas if we say yes. That’s about 1/13,700th of the debt.
It’s hard to get a handle on numbers that big, so to put that in perspective, let’s get back to the baby carrot. Imagine that the height of the Stephens building (365 feet) is the $16 trillion national debt. That $1.2 billion would be the length of a ladybug. Of course, we’re not just talking about one year if we expand. Between now and 2021, the federal government projects to contribute around $10 billion. The federal debt is projected to be around $25 trillion by then, so we’re talking about 1/2,500th of the debt. Compared to the Stephens building? That’s a baby carrot.
______________
Here is how it will all end if everyone feels they should be allowed to have their “baby carrot.”
How sad it is that liberals just don’t get this reality.
Here is what the Founding Fathers had to say about welfare. David Weinberger noted:
While living in Europe in the 1760s, Franklin observed: “in different countries … the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”
Alexander Fraser Tytler, Lord Woodhouselee (15 October 1747 – 5 January 1813) was a Scottish lawyer, writer, and professor. Tytler was also a historian, and he noted, “A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.”
Thomas Jefferson to Joseph Milligan
April 6, 1816
[Jefferson affirms that the main purpose of society is to enable human beings to keep the fruits of their labor. — TGW]
To take from one, because it is thought that his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, “the guarantee to every one of a free exercise of his industry, and the fruits acquired by it.” If the overgrown wealth of an individual be deemed dangerous to the State, the best corrective is the law of equal inheritance to all in equal degree; and the better, as this enforces a law of nature, while extra taxation violates it.
[From Writings of Thomas Jefferson, ed. Albert E. Bergh (Washington: Thomas Jefferson Memorial Association, 1904), 14:466.]
_______
Jefferson pointed out that to take from the rich and give to the poor through government is just wrong. Franklin knew the poor would have a better path upward without government welfare coming their way. Milton Friedman’s negative income tax is the best method for doing that and by taking away all welfare programs and letting them go to the churches for charity.
_____________
_________
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733
Williams with Sowell – Minimum Wage
Thomas Sowell
Thomas Sowell – Reducing Black Unemployment
—-
Related posts:
Welfare Spending Shattering All-Time Highs
We got to act fast and get off this path of socialism. Morning Bell: Welfare Spending Shattering All-Time Highs Robert Rector and Amy Payne October 18, 2012 at 9:03 am It’s been a pretty big year for welfare—and a new report shows welfare is bigger than ever. The Obama Administration turned a giant spotlight […]
We need more brave souls that will vote against Washington welfare programs
We need to cut Food Stamp program and not extend it. However, it seems that people tell the taxpayers back home they are going to Washington and cut government spending but once they get up there they just fall in line with everyone else that keeps spending our money. I am glad that at least […]
Welfare programs are not the answer for the poor
Government Must Cut Spending Uploaded by HeritageFoundation on Dec 2, 2010 The government can cut roughly $343 billion from the federal budget and they can do so immediately. __________ Liberals argue that the poor need more welfare programs, but I have always argued that these programs enslave the poor to the government. Food Stamps Growth […]
Private charities are best solution and not government welfare
Milton Friedman – The Negative Income Tax Published on May 11, 2012 by LibertyPen In this 1968 interview, Milton Friedman explained the negative income tax, a proposal that at minimum would save taxpayers the 72 percent of our current welfare budget spent on administration. http://www.LibertyPen.com Source: Firing Line with William F Buckley Jr. ________________ Milton […]
The book “After the Welfare State”
Dan Mitchell Commenting on Obama’s Failure to Propose a Fiscal Plan Published on Aug 16, 2012 by danmitchellcato No description available. ___________ After the Welfare State Posted by David Boaz Cato senior fellow Tom G. Palmer, who is lecturing about freedom in Slovenia and Tbilisi this week, asked me to post this announcement of his […]
President Obama responds to Heritage Foundation critics on welfare reform waivers
Is President Obama gutting the welfare reform that Bill Clinton signed into law? Morning Bell: Obama Denies Gutting Welfare Reform Amy Payne August 8, 2012 at 9:15 am The Obama Administration came out swinging against its critics on welfare reform yesterday, with Press Secretary Jay Carney saying the charge that the Administration gutted the successful […]
Welfare reform part 3
Thomas Sowell – Welfare Welfare reform was working so good. Why did we have to abandon it? Look at this article from 2003. The Continuing Good News About Welfare Reform By Robert Rector and Patrick Fagan, Ph.D. February 6, 2003 Six years ago, President Bill Clinton signed legislation overhauling part of the nation’s welfare system. […]
Welfare reform part 2
Uploaded by ForaTv on May 29, 2009 Complete video at: http://fora.tv/2009/05/18/James_Bartholomew_The_Welfare_State_Were_In Author James Bartholomew argues that welfare benefits actually increase government handouts by ‘ruining’ ambition. He compares welfare to a humane mousetrap. —– Welfare reform was working so good. Why did we have to abandon it? Look at this article from 2003. In the controversial […]
Why did Obama stop the Welfare Reform that Clinton put in?
Thomas Sowell If the welfare reform law was successful then why change it? Wasn’t Bill Clinton the president that signed into law? Obama Guts Welfare Reform Robert Rector and Kiki Bradley July 12, 2012 at 4:10 pm Today, the Obama Department of Health and Human Services (HHS) released an official policy directive rewriting the welfare […]
“Feedback Friday” Letter to White House generated form letter response July 10,2012 on welfare, etc (part 14)
I have been writing President Obama letters and have not received a personal response yet. (He reads 10 letters a day personally and responds to each of them.) However, I did receive a form letter in the form of an email on July 10, 2012. I don’t know which letter of mine generated this response so I have […]