DEBT DEAL SLEIGHT OF HAND
The debt deal proves the White House and Congress inept. The nation is void of leadership capable of averting America’s impending economic catastrophe. Refusing to confront the reality of a debt soaring out of control, the President and Congressional leaders have agreed to a measure that will result in no reduction in government spending only a modest reduction in the rate of increase in that spending, no payments to stem the growth of or reduce the nation’s $14.5 trillion debt, and no payment to reduce the nation’s $61 trillion (and growing) unfunded liabilities for entitlement and other programs. In short, the debt deal is a dramatic farce. Although it raised the debt ceiling, that happenstance does nothing to change the underlying debt dynamic that threatens the very survival of the United States.
The deal reached increases the debt ceiling (the amount the federal government can spend without new congressional authority) by $2.4 trillion. It allows immediate increase in federal spending of $400 billion. President Obama is authorized to request an additional $500 billion in the next few months. A further increase of $1.2 trillion and $1.5 trillion is permitted in the debt ceiling after a special committee defines matching levels of additional spending cuts. The deal calls for $900 billion in spending cuts over the next ten years, thus causing only about $91 billion a year to be cut from the federal budget. That $91 billion a year does not cut the federal budget, it merely reduces the rate of increase. In short, the nation is still on a crisis course, spending itself into oblivion; there are no real cuts in government spending created by this deal. Under the deal a House and Senate special committee of twelve people is assigned the task of identifying spending cuts by Thanksgiving, another dramatic side-show and proof that we are leaderless. If the committee deadlocks or Congress rejects its recommendations, then across the board spending cuts are supposed to occur, totaling $1.2 trillion (but watch politicians maneuver to wiggle out of that commitment).
This year, the United States will spend $1.5 trillion more than it takes in from tax receipts. Under the Obama Administration, the national debt has increased from $10.7 trillion to $14.5 trillion. Annual debt increases are projected to increase at over $1 trillion annually at least until 2019. The U.S. national debt will equal over $25 trillion by 2019, just eight years from now. Present unfunded entitlement commitments exceed $61 trillion. A reduction in spending of $2.4 trillion over the next ten years is thus a drop in the bucket, creating modest annual reductions in spending increases, not cutting the budget at all.
The debt deal is thus a political sleight of hand. It does nothing to change the dire circumstances confronting the nation. It proves to Americans that their government is inept, dangerously out-of-control, and leaderless. President Obama has established beyond peradventure of doubt that he lacks the vision and skill needed to save the nation from economic catastrophe which is but a few years away. Indeed, his history to date proves that he favors a corporatist state where government and leading industry merge and is willing to expend vastly more money than tax revenues yield to achieve that objective, even if it ensures economic disaster a few short years from now. His failure to lead combined with his commitment to replace a free enterprise economy with a government planned economy should convince voters that he must be removed from office in 2012.
In the House and Senate, Republican and Democratic leaders likewise have proven themselves incapable of establishing a clear vision of how the nation can overcome the economic crisis. Consequently, voters will be wise to remove from office those who have proven themselves incapable of exercising true leadership to save the nation from economic collapse.
Despite impending financial ruination, no politician has presented a detailed plan to reduce federal spending by the trillions of dollars per year needed to bring about economic recovery. The solution to America’s problems lies in making substantial cuts in spending while simultaneously relieving Americans of their tax burden. We can achieve the needed spending cuts in the following ways. We should eliminate the Department of Education, the Department of Energy, the Department of Commerce, the Federal Trade Commission, the Consumer Product Safety Commission, the National Endowment for the Humanities, the National Endowment for the Arts, the National Aeronautic and Space Administration, and the Consumer Financial Protection Bureau. Doing so would save approximate $1.5 trillion per year. We should eliminate the Food and Drug Administration by replacing it with a statutory scheme that, among other things, vests in private university centers drug safety and efficacy reviews in a blinded system. We should eliminate the Federal Communications Commission in favor of a property rights based system, giving those who now possess licenses property rights in the operating parameters defined by those licenses. Eliminating the FDA and the FCC in this way would save $3.5 billion annually.
We should repeal the stimulus bill and Obamacare, saving over $1.5 billion. We should substantially reduce the Department of Agriculture, eliminating subsidy programs and price supports among other regulations. We should enact a moratorium on the promulgation of any new federal regulations and require that each existing regulation be eliminated unless within the year passed into law by the Congress, thus causing a number of anticompetitive barriers to entry to disappear. We should reform the Department of Defense by favoring aggressive adoption and use of unmanned aerial and ground vehicles in place of the far costlier manned systems that still predominate, saving hundreds of billions of dollars annually. We should remove American forces from Iraq and Afghanistan, saving over $100 billion annually. Although there is much more that can and should be done to reduce the federal government’s size and scope, the foregoing measures alone would cut government spending by over $2.5 trillion annually.
The foregoing approach would cause actual cuts in government spending and regulation that would not only balance the annual budget but permit payments to be made on the national debt. Those cuts must be followed by Medicare and Social Security reforms, such as those I have recommended in prior newswithviews.com articles, that would result in substantial reductions in entitlement spending and increased reliance on private insurance and investment. We must also pass a balanced budget amendment, forcing the federal government to live within its means because neither the President nor the Congress are anything less than derelict even in the face of impending economic doom.
To ensure that the economic pie grows in size and to jump start the economy in a way that will greatly reduce unemployment levels, we have to reject President Obama’s failed state planning approach in favor of liberating the private sector and keeping in the hands of hard working Americans money that would otherwise be taxed. We should eliminate the personal income tax. By doing so, federal revenues would drop by 40% but the economy would rebound from recession, causing that drop to be mitigated. The long term effects of allowing the average taxpayer, who pays about $12,500 to the federal government in taxes each year, to retain money otherwise paid in taxes would be extraordinary. Consumer confidence would rise. Pent up demand for the purchase of big ticket items would be relieved. Savings and investment would increase. Interest rates would drop. The economy would turn around as the $1.6 trillion kept in the market fed the growth of productive enterprise rather than parasitic government.
There is a way out of the current economic crisis. It requires a frank recognition by those in office that the nation is very near financial ruin and must cut, not reduce, spending, and cut, not raise, taxes, to bring us back from the brink. Sovereignty must move from the government to the people (where our Founding Fathers intended it to be vested). Those in government must eat humble pie. Politicians must accept that the genius of a free people vastly exceeds the planning of federal bureaucrats. Political leaders must commit to restore the Founding Fathers’ limited federal republic.
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Liberating Americans from the weight and constraint of economic regulation, freeing people to engage in their own preferred pursuits of industry and improvement, drastically cutting the federal government down to one quarter of its present size, and allowing taxpayers to retain their earnings are precisely the means necessary to transform the economy from recession to recovery and return the market to full employment. We will likely witness a dramatic reduction in the size and scope of the federal government one way or another. Either our leaders will continue along a derelict path of ever increasing debt, reaching the crisis point within the next five years, or will accept the inevitability of the crisis and rapidly move to cut spending and regulation, restoring the federal government to the humble state required for freedom, economic recovery, and progress.
© 2011 Jonathan W. Emord - All Rights Reserved