Friday, October 4, 2013

A New Civil War: No More Debt! No More Government!

Chants of "No More Debt! No More Debt!" could (and should) be the new rallying cry for Republicans to put an end to unlimited government and it's associated excesses. Republicans could just refuse to approve any more debt limits---ever. They do have that power if they hang together.

What if the Republicans instead started chanting in unison, "No More Debt," "No More Debt" and really meant it?   It would be the most significant rallying cry since Paul Revere and his associates cried-out "the King's men are coming!"

It could and should mark the end of "peak debt" and therefore "peak government." Nothing would more effectively put the dagger in the heart of the debt-funded free-for-all in Washington (and liberal experiment) than stopping the debt accumulation---cold.  It would kill the shameful charade of governance by this pitiful government.  Can you imagine the epic proportion of hysteria of all the spoiled little children in Washington?  Liberals would self-immolate in the streets!  Imagine the screaming and gnashing of teeth from the minions of lobbyists and lawyers who have been gorging at the overflowing Federal trough.  And you could also expect this administration to maximize the inconvenience to the public like they did with the puny sequester cuts.

All of this would have to happen after the Republicans take the Senate and White House.

Government Grows 4 Times Faster Than Economy

Government is so bloated because of debt.  The real economy has only grown 75% since 1990, but government (local and national) has grown over 300% since then.   How's that?  Because of debt--and huge amounts of it.  I say enough is enough.  Have a look at charts from Charles Hughes Smith:

Now for the chart showing Debt Increases:


Put The Government On a Diet

Current Federal spending is $3,800 billion with a projected budget deficit of $729 billion.  The improved deficit situation is due to higher tax collection and the "sequestration" cuts.  Since the federal budget deficit is down to about 5% of GDP or about 18% of government spending,  a sudden haircut of this magnitude would still be very disruptive (would cause a recession that would last awhile, stocks would 'crash' and unemployment would soar), therefore it should be done gradually.  But putting the government on a diet would set up a healthy scenario for the country in the long term.

Remember, after the 2nd World War, the US government cut spending from over 50% to 11% of GDP over several years, so don't say it can't be done without huge harm.  Yeah, there was a recession in the late 1940s, but to stop the exponential growth of debt and government mismanagement, the fight is worth it.  Deficit spending and money printing hasn't helped the economy nearly as much as predicted, so removing government spending may not hurt nearly as bad as expected.

A reduction of 18% of government spending to balance the budget would reduce Federal spending back to about $3,000 billion or to the 2008 level.  Even with that drastically reduced level of spending, the ratio of Federal spending to GDP would still be 21% of GDP-- still higher than any other administration during the 1980s and 1990s (19%).

The net interest payments on the Federal debt is up to $255 billion and is included in that $3,800 of Federal Spending.   Since the Government receipts are over $3,000 billion, there is no chance of any default on US debt obligations. 

Balancing the Budget Could Happen

Cuts of $700 billion can be done over time.  It would overwhelm this incompetent administration, however.  Cuts of this magnitude would also have to be done in a period of reduced regulations in the economy, something that this administration knows nothing about.  

The biggest source of deficits now is entitlements.   Spending on Medicare, Medicaid and Social Security is over $1,500 billion while receipts are only $1,000.   Since these programs were meant to be paid for by payroll taxes, one obvious solution that would alert young taxpayers to their outsized responsibility in taking care of the elderly in this country, would be to raise the 6.2% payroll tax to 10% (which would raise the 6.2% tax on businesses to 10% too) to match taxes to spending.   Wouldn't that be an eye opener??  It would also nearly balance the federal budget and also would be the right thing to do.  Since the entitlement spending gap to receipts is only going higher and higher in the years ahead.  If Congress passed a law to keep these accounts in balance that would put pressure on Congress from the electorate (working electorate that is) to contain and restrain spending.  But taxes on working people is putting austerity on the people, not the government!

Some departments should be eliminated (Energy, Education, Housing and Urban Development) and downsized (Agriculture, HHS, Commerce).  Healthcare and social security entitlements would have to be cut.   See my blog "How to Cut $450 Billion In Federal Spending" which was based on conservative estimates of savings and didn't include any Medicare/Medicaid,  ObamaCare or Social security cuts.  Military spending would have to be cut--meaning a reduction of troops.  But we have far too many soldiers in far too many countries.  Banning public unions, who respresent some 40% of government workers (mostly office workers who hardly need union representation), would reduce cost of government.  Repeal of 1931 Bacon Davis Act and 1935 National Labor Relations Act would further reduce the cost of government and government procurement.  There is no reason to unionize government work--it's just an extortion of taxpayer money. Every dollar paid above market rates is just extortion of taxpayers.

Cuts should come to the programs that have seen the highest growth under Obama.  Foodstamps and Social Security Disability rolls have rocketed by over 50%, and spending increased by 100%, since Obama's inauguration.  These programs must be trimmed back.   We could put an end to the NSA too.   

I say hold the line.  No more debt.  No increased debt ceiling.  Ever.

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