Well, Barack Obama has officially unveiled the White House’s latest budget proposal. Despite being released on Valentine’s Day, it has been met with minimal love thus far by anyone possessing even an inkling of respect for fiscal restraint. The USA Today editorial board stated that “It’s becoming hard not to conclude that Obama doesn’t much care about the debt threat or has decided to wait until after the 2012 elections. Either would be a shame, and economically risky.” They closed a scathing critique by concluding that “At some point, the shadowboxing has to stop.”
Consisting of a record $3.7 trillion dollars in federal spending, one might conclude that this statement from the centrist newspaper might be an understatement. As tough as these numbers are to swallow, it does not even begin to state the perilous condition America is being put in due to government expenditures. Most know the government reports its debt surpasses 14 trillion dollars, but what many do not know is that this does not even include the crush of unfunded liabilities represented by Medicare and Social Security. Even the illusory balanced budget of the late Clinton years was just that; a mirage fostered by a slew of accounting tricks that would land the average Joe in prison. This $14 trillion debt, as large as it is, does not even take these two costly entitlement programs into account. And why does the 14 trillion range sound so familiar? Well, the entire U.S. GDP was 14.6 trillion in 2010.
Meanwhile, things appear to be snowballing. A look at the raw numbers is staggering, revealing just how quickly the Keynesian idea of using government funds to top off private spending has run amok. The last budget submitted by former President Clinton for fiscal year 2001 was a paltry 1.9 trillion; yes that is correct, the federal budget has seen a 100% increase in just the last decade. By comparison, the last budget signed into law by that fiscal hawk George W. Bush for FY 2009 was 3.1 trillion, a stunning number at the time. But that was so 2009. If this current budget goes through as written, federal expenditures will have shot up 18% during Obama’s first two years in office.
Even if tax revenues were sufficient enough to cover this spending (if the government were taking in 3.7 trillion from taxpayers annually) it would still be inexcusable. The fact that the government is doing many things not constitutionally authorized and which could be better done by private actors in the economy is reason enough to shudder at it. The wealth destruction that occurs from their inefficiencies should produce the incentive to avoid such a massive blitz of outlays.
But even a balanced budget cannot pare down the debt.
It would only succeed in keeping us in a 14 trillion plus dollar hole. Unfortunately, government receipts are nowhere near enough to cover this. Depending on the economy’s strength, it collects between 2 and 2.5 trillion in a given year, the end result of this being annual trillion plus dollar deficits. This has resulted in a near tripling of our debt over the last ten years.
Okay, so most of us do have a general idea that public debt is out of control and has been for quite some time. But the appearance of normalcy has been maintained for the time being, so the majority of our citizens take this outward veneer as evidence that things are fine. Not ideal, but manageable.
Considering most Americans are buried in student loan and credit card debt, this kind of behavior might actually appear marginally acceptable. A country that used to pride itself as a worldwide creditor while cringing at the concept of debt has become tacitly accepting of these two concepts being turned upside down by Washington. The temptation of succumbing to easy, short term pleasure at the expense of a mortgaged future has proven too much for our government to resist. This terrible virus has now spread to the everyday lifestyles of many of our citizens, infecting the way we live and interact. The rapid inflation caused by our monetary policy in 1970s started this mind set, as dangerous borrowing became the only way for many to keep pace.
Until enough Americans are determined to put up with the short term pain required to reverse this governmental trend, things will continue unabated. Cutting a program or two does not turn the clock back on the concept of the federal government acting as a paternal figure. As French free market economist Frederic Bastiat said: “The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else.” Thus far this fiction has manifested itself in only numbers and academic debates. But what happens when the reality hits, and the U.S. is overtaken by massive price inflation and an inability to meet its obligations? Would it not be better to take some pain for now in order to get things right in the long term?
Apparently Barack Obama and the geniuses crafting his budget do not think so.
Many of the egocentric economists who missed seeing the entire 2008 crisis coming are now trying to say things are not so bad, that there could be a proverbial light at the end of the tunnel. Perhaps all this government spending might work after all, they say. But as author and historian Thomas Woods recently noted, this light at the end of the tunnel is nothing but the headlights of an oncoming train.
With no advocate for government restraint and constitutional limitations in the White House, all we can do is hope that this prediction is wrong. Come to think of it, we were all asked to vote for Hope and Change in 2008, were we not? Since we did not get any fundamental Change, all we have left now is baseless Hope.