On America’s Deficit

By James Schaefer

The current issue of The Economist (Briefing: America’s Deficit, November 20,2010) calls for spending cuts and tax increases in the ratio of 75:25.  However — whether fact or perception — all tax increases are permanent, and all spending cuts are temporary.

This point has not been lost on America’s voting populace.

The problems of government spending are numerous:

The size of the current federal fisc is 25% of GDP, compared to 18.2% historically;

FY2010 spending was $3.5 trillion on $2.1 trillion in tax receipts — at 67% above revenue, this is an unsustainable strategy for any business or household, and it should be no different for government;

The $13.7 trillion in accumulated debt represents 90% of GDP, nearing the tipping point for insolvency;

Unfunded liabilities are $111 trillion (U.S. Debt Clock), more due to politicians’ promises for Social Security, Medicare, and the prescription drug benefit than any other government function, including defense.  The latter happens to be required by the Constitution.

Government at all levels — federal, state, and local — has a spending problem.  America’s taxpayers “get it”; time will tell whether members of Congress do.

With apologies to Gen. Chesty Puller, “Men, were surrounded.  This greatly simplifies our problem”.

We are surrounded by demands for yet more tax revenue, and this greatly simplifies the problem.

We can begin with a simple premise: there will never, ever, be enough tax revenue to satisfy the political appetite.

Stephen Moore and Richard Vedder explain in today’s Wall Street Journal (Higher Taxes Won’t Reduce the Deficit) why tax increases lead to ever-more spending.

We need to cut spending, and we need to permanently limit government’s ability to spend at will.

We need constitutional amendments to balance the budget and to limit the size of government.

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