A Lesson for Us

By James Schaefer

The unfolding debt crisis in Greece, and elsewhere, should be a lesson for the U.S., and a sobering one at that.

When governments spend beyond their means to fund programs, they create an entitlement mentality.  Attempts to rein in spending, trim the entitlements, and bring order to government’s financial house result in someone’s “ox getting gored.”  They lead, ultimately, to the riots in the streets that we have seen in the news, and in some cases, to death.

Taxpayers do not have an obligation to make hard sacrifices to fund every good program that is suggested.  Certain government services are essential; others, though not essential, clearly provide benefits that far outweigh costs.  However, many, many government programs need to be cut.

Steamtown USA, anyone?  $237 million to renovate a rusting railyard in Pennsylvania, which was then given to the National Park Service—who did not want it.  That money came right out of the pockets of small business owners, struggling to meet payroll and provide employee benefits and fund expansion, and from taxpayers, directly from their household budgets, struggling to meet daily expenses, and to save for retirement.

We cannot have it all.  Two things we know for sure: 1) There will always be more great ideas about excellent and well-intended programs and services that government should provide than there is tax revenue to support.  2) There will never, ever be enough tax revenue to satisfy the political appetite (see item 1).

Very soon in the U.S., some hard decisions will have to be made.  We as a people will need to decide what services we need the federal government to provide, and what services we want, and what government programs we do not want.

Current government spending is $3.5 trillion on $2.1 trillion in revenue.  Deficit spending is not a sustainable long-term strategy, not for individuals, or for businesses, or for governments, as the recent crisis in Europe, and Japan’s experience over the past twenty years, have shown.

We are seeing commentary across the political spectrum – see Leslie Eastman’s blog on health care, and the Southern California Tax Revolt Coalition.  There is a groundswell of opinion out there, and it is pointing in a single direction: get federal spending in order.

Government spending has grown to 25% of GDP within the past year.  The historic average over the past 40 years is 18.2%.

Deficit spending has been the norm for a half-century or more, with two minor exceptions: a brief blip in 1969, under the Johnson administration, and for about four years under Mr. Clinton, from mid-1997 to 2001.  We can wait for the next billboard to go up: “A Budget Surplus: Miss Me Yet?”  [Yes, Mr. Clinton, on fiscal policy, perhaps we do . . . ]

We as a country need to decide two things: 1) How big we want the federal government to be, as a percent of GDP; and 2), whether we want to allow deficit spending at all, and if so, under what circumstances.

In doing so, we need to remember that every dollar spent on funding a government service or program comes directly out of the pockets of taxpayers and businesses, the people who earned it as income or created it as wealth.

The mid-term elections are almost upon us.  We need to send to Congress those representatives who will put an unswerving priority on fiscal responsibility.

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1 Comment
  1. Michael Smith says:

    Mainstream commentators like Paul Krugman talk about the Greek crisis strictly in financial terms–capital movement, the bond markets, the inflexibility of the Euro, Greece’s Enron-style accounting, etc. The social underpinnings of the problem (Greece’s deep-rooted tradition of tax evasion, for example) have gotten some press. But for a glimpse of the fundamental reasons why Greek society is self-destructing, read Mark Steyn. He’s been warning for years that Europeans have made promises to themselves–in the form of entitlements–that they can’t possibly keep. Their low birthrates and shrinking populations are the exact opposite of what’s required to keep a Ponzi scheme afloat. In Greece, the pyramid is upside down; that’s why the whole scheme is doomed.

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