What the Democrats would have us believe is that they are on a crusade of economic statesmanship when really it is simple legislative consumerism designed to protect political turf. I believe President Obama is sincere when he says we are in a dire situation, but it seems that he has simply given Congress a license to continue to do what they do best; spend.
Why is spending really a concern? Why shouldn’t we fund all these initiatives out of the federal coffers? Why shouldn’t we just send our Congressman up the hill to get our share?
Because according to David M. Walker former Comptroller General of the Untied States, we can’t afford to do so. In an article published last spring in Politico, Mr. Walker wrote:
"The current federal fiscal policy has created a disconnect between today’s citizens and future taxpayers. Baby boomers and current retirees benefit from today’s government spending and tax policies, while our children, grandchildren and generations to come will be expected to pay the bill for today’s excess consumption.
From a broad perspective, many in Congress think that since the U.S. is currently the world’s sole superpower, we will always be able to borrow from foreign countries whenever necessary at attractive interest rates. Unfortunately, the government — like too many Americans — has become addicted to debt.
With a federal deficit in the billions, government appears numb to running large operating budgets every year, irrespective of the state of the economy or the existence of wars. The resulting deficits and related debt burdens are set to escalate dramatically when baby boomers retire in big numbers.
To put things in perspective: Absent meaningful reforms, income tax rates would have to more than double from today’s levels for the federal government to deliver on its promises and pay its bills."
In his March 15, 2008 editorial in The Wall Street Journal, South Carolina Governor Mark Sanford expressed a similar concern when he wrote, “Since 2000, the federal budget has increased 72%, to $3.1 trillion from $1.8 trillion. The national debt is now $9 trillion -- more than the combined GDP of China, Japan and Canada. Add in Medicaid, Medicare and Social Security commitments, and as a nation we are staring at more than a $50 trillion hole -- an invisible mortgage of $450,000 for every American family.”
In his March 15, 2008 editorial in The Wall Street Journal, South Carolina Governor Mark Sanford expressed a similar concern when he wrote, “Since 2000, the federal budget has increased 72%, to $3.1 trillion from $1.8 trillion. The national debt is now $9 trillion -- more than the combined GDP of China, Japan and Canada. Add in Medicaid, Medicare and Social Security commitments, and as a nation we are staring at more than a $50 trillion hole -- an invisible mortgage of $450,000 for every American family.”
These concerns were being voiced before we began to consider spending an additional $4 Trillion on “stimulus measures” in the form of industry bailouts, interest rate cuts and spending measures. The currently debated stimulus package is supposed to be the new and improved version of the economic stimuli we have had over the last 11 months that add up to $1 Trillion. We keep spending hoping that we can maybe return to the heyday of 2006 when anyone could get a house for nothing, everyone was comfortable and consumers had their wallets open. The risks that came along with that environment have come to roost. Are we really trying to get back to those “good old days?”
American consumers have already gotten the message and begun tightening their belts. Personal consumption is down by 3.5% and savings rates have doubled year over year to 2% (the 60 year average is 7%). If only we could get government to follow suit. Sales tax and income tax will be down, but state and local governments tend to lag in dropping tax receipts so they are just now figuring out that spending like it’s 2006 won’t work. State governments from both parties are looking to the federal government for a rescue. It seems like we’re determined to treat an economic hangover with more liquor.
If over-leverage is what got us into this mess, then more spending and increasing leverage isn’t likely to be the long-term solution. Some of the stimulus might actually be worthwhile, but no one has the willpower to flow it in over time to see what actually works. What we are likely to be left at the end of it all is higher taxes, higher inflation, a weaker dollar and higher energy prices. The prevailing attitude seems to be, “As long as we get ours as the entitled society today, our progeny can figure all that out for themselves.”
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