The Problem With Govt.
July 28, 2016 at 4:25 p.m.
By Gary [email protected]
The Congressional Budget Office put the deficit for the year at $438 billion. That's worse than anybody thought.
Just last month the CBO guessed it would be around $400 billion
In July, the White House guessed it would be $390 billion.[[In-content Ad]]Well, they were all wrong. And frankly, I'm pretty confident the $438 billion number is optimistic. Truth be told, it's going to be higher than that. Those numbers don't even include the recent $700-plus billion bailout package.
We ran an editorial earlier this week that noted next year's deficit is expected to top $500 billion.
Turning the clocks back to 1981, we find that $500 billion was about what we needed to operate the entire government.
The huge, looming question is - quite simply - why?
Why in the world would our government want to operate this way?
Politicians like to tell us how difficult, vexing and complicated these issues are. I don't see it that way.
It's really pretty simple. Government needs to stop spending more than it takes in.
This is what drives me crazy when I hear politicians talk about these issues.
They always talk about it like somebody else is to blame, when the truth of the matter is they're the ones spending all the money.
Here are some numbers from the past five years.
The first number is federal receipts - how much the government collected in tax revenues. The second number is federal outlays - how much the government spent. The third number is the difference - a deficit in each of the last five years. Everything is in trillions of dollars.
'03 1.78 2.16 -.378
'04 1.88 2.29 -.413
'05 2.15 2.47 -.318
'06 2.41 2.65 -.248
'07 2.57 2.73 -.162
Now, any fool can see the problem wasn't on the revenue side of things.
In fact, federal receipts in 2005 set a record, which was broken each subsequent year through 2007.
Even the most ardent critic of the current administration would have to admit that the revenue stream was not the problem.
But this is what worries me.
I keep hearing candidates Barack Obama and Joe Biden talking about the "abject failure" of the W tax cuts and how it was the "worst economic policy" in history causing the "worst financial crisis since the Great Depression."
That's abject nonsense. The tax policy created record levels of revenue to the treasury.
John McCain and Sarah Palin try to distance themselves from W's tax policy as Obama and Biden hammer on them for bringing us another four years of W.
I say, bring on another four years of record revenue.
Are all these people saying that the government collecting $2.57 trillion in taxes last year simply isn't enough? They need more?
It's insane. There was nothing wrong with the revenue side of W's tax policy. His tax cuts worked. Enacted in 2003, they helped bring in record amounts of revenue.
Why mess with that side of the equation?
And, of course, to be more palatable to the U.S. voter, both guys are talking about how much they're going to do for us.
McCain's talking about buying up every foreclosed mortgage in the country and Obama's going to give us all free health care.
How are they going to do that? We're broke, for crying out loud.
Somebody has got to make these people understand that virtually all the problems we face today is not because we don't pay enough taxes.
Taxes - federal, state, local, excise, sales - at all levels consume nearly half of every dollar Americans earn.
Taxes are not the problem.
The problem is a government out of control with regard to spending. It's the spending side that's out of whack, not the taxing side.
When our government spends more than it takes in, it creates deficits. Then the rest of the world finances our debt. This devalues the dollar. The deficits eat up more and more of the federal budget. This puts a squeeze on government programs, but Congress doesn't squeeze anything. It just runs up more debt.
So what?
Well, in the short run anyway, growth in the deficit affects economic output. When the government borrows money it adds to total credit demand and pushes up interest rates. Higher interest rates push up the cost of financing for businesses, homeowners and consumers and inflation fears set in.
Enter the Federal Reserve, which lowers interest rates.
Artificially low interest rates encourage people to put stuff on their credit cards and recently, buy homes they can't afford. Foreclosure rates rise. The credit markets suffer.
You get the picture. It's like a snowball rolling down a hill. The whole thing starts to unravel and the government jumps in and does what?
Increases the debt.
In just the past eight months, our lawmakers gave us $150 billion in rebate checks, offered $400 billion in loans to the mortgage market, put up $200 billion to prop up Fannie Mae and Freddie Mac, guaranteed $29 billion in the Bear Stearns sale, dumped $85 billion into insurer AIG and offered $50 billion to help out money market funds.
Did I mention the $700 billion bailout plan?
Amid all this, on Thursday government policy makers were talking about bailing out the holders of commercial paper to solve the credit crisis.
Seems to me the more dollars they inject into the system, the more it devalues the dollars already in existence, making dollars less attractive to the investors who are buying them to finance the debt.
More credit. More debt. Can we stop the madness, please?
Let credit be tight. Let interest rates rise. Force businesses and consumers to operate within their means. Get them to start saving for a change.
And the same goes for government. Severely limit the size and scope of government. Read my lips: "No new programs."
Sure, there will be tough times. But I truly believe it's the only way out of this mess.
Anything short of extreme austerity on the part of Americans and their government is only a bandage on what I'm afraid is a looming economic catastrophe.
The Congressional Budget Office put the deficit for the year at $438 billion. That's worse than anybody thought.
Just last month the CBO guessed it would be around $400 billion
In July, the White House guessed it would be $390 billion.[[In-content Ad]]Well, they were all wrong. And frankly, I'm pretty confident the $438 billion number is optimistic. Truth be told, it's going to be higher than that. Those numbers don't even include the recent $700-plus billion bailout package.
We ran an editorial earlier this week that noted next year's deficit is expected to top $500 billion.
Turning the clocks back to 1981, we find that $500 billion was about what we needed to operate the entire government.
The huge, looming question is - quite simply - why?
Why in the world would our government want to operate this way?
Politicians like to tell us how difficult, vexing and complicated these issues are. I don't see it that way.
It's really pretty simple. Government needs to stop spending more than it takes in.
This is what drives me crazy when I hear politicians talk about these issues.
They always talk about it like somebody else is to blame, when the truth of the matter is they're the ones spending all the money.
Here are some numbers from the past five years.
The first number is federal receipts - how much the government collected in tax revenues. The second number is federal outlays - how much the government spent. The third number is the difference - a deficit in each of the last five years. Everything is in trillions of dollars.
'03 1.78 2.16 -.378
'04 1.88 2.29 -.413
'05 2.15 2.47 -.318
'06 2.41 2.65 -.248
'07 2.57 2.73 -.162
Now, any fool can see the problem wasn't on the revenue side of things.
In fact, federal receipts in 2005 set a record, which was broken each subsequent year through 2007.
Even the most ardent critic of the current administration would have to admit that the revenue stream was not the problem.
But this is what worries me.
I keep hearing candidates Barack Obama and Joe Biden talking about the "abject failure" of the W tax cuts and how it was the "worst economic policy" in history causing the "worst financial crisis since the Great Depression."
That's abject nonsense. The tax policy created record levels of revenue to the treasury.
John McCain and Sarah Palin try to distance themselves from W's tax policy as Obama and Biden hammer on them for bringing us another four years of W.
I say, bring on another four years of record revenue.
Are all these people saying that the government collecting $2.57 trillion in taxes last year simply isn't enough? They need more?
It's insane. There was nothing wrong with the revenue side of W's tax policy. His tax cuts worked. Enacted in 2003, they helped bring in record amounts of revenue.
Why mess with that side of the equation?
And, of course, to be more palatable to the U.S. voter, both guys are talking about how much they're going to do for us.
McCain's talking about buying up every foreclosed mortgage in the country and Obama's going to give us all free health care.
How are they going to do that? We're broke, for crying out loud.
Somebody has got to make these people understand that virtually all the problems we face today is not because we don't pay enough taxes.
Taxes - federal, state, local, excise, sales - at all levels consume nearly half of every dollar Americans earn.
Taxes are not the problem.
The problem is a government out of control with regard to spending. It's the spending side that's out of whack, not the taxing side.
When our government spends more than it takes in, it creates deficits. Then the rest of the world finances our debt. This devalues the dollar. The deficits eat up more and more of the federal budget. This puts a squeeze on government programs, but Congress doesn't squeeze anything. It just runs up more debt.
So what?
Well, in the short run anyway, growth in the deficit affects economic output. When the government borrows money it adds to total credit demand and pushes up interest rates. Higher interest rates push up the cost of financing for businesses, homeowners and consumers and inflation fears set in.
Enter the Federal Reserve, which lowers interest rates.
Artificially low interest rates encourage people to put stuff on their credit cards and recently, buy homes they can't afford. Foreclosure rates rise. The credit markets suffer.
You get the picture. It's like a snowball rolling down a hill. The whole thing starts to unravel and the government jumps in and does what?
Increases the debt.
In just the past eight months, our lawmakers gave us $150 billion in rebate checks, offered $400 billion in loans to the mortgage market, put up $200 billion to prop up Fannie Mae and Freddie Mac, guaranteed $29 billion in the Bear Stearns sale, dumped $85 billion into insurer AIG and offered $50 billion to help out money market funds.
Did I mention the $700 billion bailout plan?
Amid all this, on Thursday government policy makers were talking about bailing out the holders of commercial paper to solve the credit crisis.
Seems to me the more dollars they inject into the system, the more it devalues the dollars already in existence, making dollars less attractive to the investors who are buying them to finance the debt.
More credit. More debt. Can we stop the madness, please?
Let credit be tight. Let interest rates rise. Force businesses and consumers to operate within their means. Get them to start saving for a change.
And the same goes for government. Severely limit the size and scope of government. Read my lips: "No new programs."
Sure, there will be tough times. But I truly believe it's the only way out of this mess.
Anything short of extreme austerity on the part of Americans and their government is only a bandage on what I'm afraid is a looming economic catastrophe.
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