A Federal Budget That Insults All Budgets

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"The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money." Alexis de Tocqueville

Condolences. If your faith in politicians as stewards of tax dollars isn't yet dead, it should be. Washington's conduct ridicules anyone who trusted that the stimulus bills and other "temporary" spending increases were designed for economic recovery. Washington's record breaking outlays have had far more to do with rewarding interest groups that contributed to victory in the prior election.

Now that the 2011 budget has arrived in mockery of the word ‘budget', it is clear Washington's addiction to spending is unremitting. Even though the president assumes robust growth, projected spending grows faster still. In 2011, he forecasts outlays of $3.834 trillion. Even if the promised growth arrives, the deficit will total almost $1.3 trillion.

If the economy is fully recovered we no longer need stimulus even according to the denizens of stimuli. But politicians love to spend. It's not their money so quite frankly, they don't care. They have one overriding purpose: getting re-elected. Given our crushing debt burden, dilapidated dollar and surging entitlement disaster, discretionary spending of $1.4 trillion defies reason. That's a lot of vote-buying even by debauched Washington standards.

The projected spending levels conjure frequent analogies to WWII, but spending in wartime was a matter of survival and had a finite horizon. Now politicians spend taxpayers' money to bribe a complicit electorate too shortsighted to comprehend it's their own property being wasted. And this horizon is infinite under the current political arrangement. It's not just the programmatic increases incident to Social Security, Medicare et al. The whole fiscal culture has been corrupted.

The last time federal spending actually lessened year over year was a slight $300 million decline in 1965. This includes every available combination of presidents and congresses, although the slowest growth generally occurs during periods of gridlock. Political paralysis is a blessed thing.

Politicians used to be hamstrung by the rule of law, but our Constitution has been consistently ignored for most of the last century. Now it serves but a quaint remainder from where the fortunes we now waste sprang. We've endured these trends for decades thanks to the colossal accumulation of capital bequeathed to us by more prudent ancestors.

Since LBJ declared War on Poverty to no apparent benefit to the poor, expenditures have risen annually. Now Washington doles out more than $2 trillion on entitlements alone. Soaring healthcare costs, the destruction of the family in poor areas, crime, drug epidemics, etc. are all exacerbated by the Welfare State. Social problems grow in proportion to the funding we exhaust chasing them. This then prompts "caring" politicians to dispense even more resources sustaining the unproductive.

The government has no resources. Everything it spends was created by private individuals and still belongs to taxpayers. All government can do is take from the industrious, the inventive, the hard-working and the frugal to dispense on the inefficient, the lazy, or the irresponsible. Government spending bites the very hand that feeds it.

And these resources no longer exist. We're now over $12 trillion in debt. Including future unfunded liabilities and those Washington assumed as a result of assorted bailouts and other mischief, the average family owes $471K and counting courtesy of government. The resources are gone.

Democrats wasted them on silly, self-defeating welfare programs and Republicans wasted them on silly, self-defeating foreign policies. Sometimes in fits of bipartisanship, they combined to waste them on even greater concepts. Government has no remaining resources, but to our peril it does have a printing press.

No matter what grandiose terms our elected leaders couch it under, there are only three ways to pay for this largesse. Certainly they can deprive productive enterprise of the resources necessary to generate economic growth via confiscatory taxes. But the disincentives ensconced in progressive taxation render it self-defeating. Washington can borrow, thus diverting capital from those endeavors actually prospering society. Another economic retardant. Or, they can inflate their way out of the mess by debasing our currency.

Bet on the latter. Fiat currency has proven throughout history to be as pernicious as any evil yet devised in its consequences for free society. Inflation is how they steal from us. Taxes take your money. Inflation leaves the money, but takes its value.

None of these options are economically sound. Each aggrandizes government at the expense of the free market. The more control we retain over our time, resources and abilities the more closely our efforts will be aligned to beneficial economic activity. The more dominion we yield to Washington, the more our efforts degenerate into politically charged madness.

Complementing government expansion, other corollary trends have developed. More people economically dependant on the political establishment and fewer still paying income taxes. At all levels, government now employs over 20 million workers. We have tens of millions more dependent on entitlements, subsidies and other property redistribution. Meanwhile, almost half of us pay no income taxes.

A society where one group can vote the belongings of another into its coffers is unsustainable. Plurality doesn't convey license to override property rights, but the polity has devolved into demagoguery. The obvious solution, to cut spending and wean people off the public dole is not politically tenable. We all have relatives nearing retirement and no one wants to tell grandma to get back to work.

The two political parties birthed in arrogance play a game of chicken. Neither will risk political suicide to undertake the necessary hard choices. As long as politicians can buy votes with your money they will and they'll win.


Bill Flax works in the banking industry. This column reflects his views and not those of his employer. Please contact him at billflax2@yahoo.com.




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