Long Term Budget Woes

Veronique de Rugy has a very pointed message about federal government spending and it boils down to this: stop it.

Thomas Jefferson once warned, "When all government shall be drawn to Washington as the center of all power, it will render powerless the checks provided of one government on another, and will become as oppressive as the government from which we just separated." Sadly that day may have arrived. The federal government now consumes about 20 percent of gross domestic product and plans to spend at least $2.4 trillion in fiscal year 2005.

Government's size and scope have reached beyond acceptable levels. If they were faithful to the Founding Fathers, lawmakers would finance a government that focused only on the constitutional mission of national security and justice. This represents roughly $400 billion of today's $2.4 trillion federal outlays. It's time to walk the walk and cut federal spending.

It's not as if we have a choice. For the last four years, Washington should have been pruning the budget. Social Security and Medicare costs will explode when the baby boomers retire. Longer life spans and rising health care costs will exacerbate the tax-burden on our children if entitlement programs are not reformed.

Firstly, think about the fact that our federal government consumes 20 percent of the GDP. It helps me, personally to think of it in more concrete terms. That is, directly, one out of every five dollars that flows through the economy is spent by Washington DC.

What kind of a drag on our economy does that really amount to? If that number were halved, what would be the effect on individual wealth and well-being? How many people would have an easier time planning for retirement or health care? How much more capital would there be available for investment?

I realize that it isn't that simple. There isn't a one to one correlation between money spent by the federal government and the money left in my wallet and yours. Fully understanding what the effects would be if that money weren't taxed and spent at that level, though, is almost impossible.

What we can say is that a grand portion of that money is wasted. Wasted on things like farm and corporate subsidies, local pet projects that help elected officials become re-elected officials, and things like Amtrak. Individually, most of these expenditures are in the "oh, that's such a small amount in such a big budget" category.

People think it's nitpicking to start in on those "little" expenditures without thinking that every $100,000 restoration of a "historic Coca-Cola building" (in a symbolic sense) is hardly alone. De Rugby points out that only $4 billion of the $2.4 trillion budget goes to defense and justice. The rest go to fund social programs, maintaining institutions that should have been completely privatized a long time ago (Amtrak and NASA, for example), pet development programs, and salaries. Lots of bureaucrats with huge staffs mean huge salaries.

The problem is that it doesn't matter who is in charge, apparently. Democrats and Republicans both like to spend money like little children who never learned to budget. And like those little children, maybe it would be good to put them on an allowance--and if they spend their money foolishly, they don't get any more until the next time their allowance is due.

A useful constitutional amendment would be one that restricted the spending of the government in very specific terms. Say 10% of the previous year's GDP in federal outlays and no more unfunded mandates to pass the cost along to the state governments. The amount could only be exceeded in times of national emergency. If the budget was a number that they had to meet rather than a number that they invent, priorities would become much more clear.

Then, if the citizens of California (or San Francisco on an even more local level) wanted to restore Coke buildings, fund artists, and pay for socialized medicine, they could happily do so with taxes at that level.

What is clear, all wishful thinking aside, is that Washington DC and the grand majority of our elected officials can't be trusted with money. They don't understand the meaning of "budget" in any kind of a rational sense, and they long ago stopped realizing that all that Monopoly money they play with has a very real effect on the economy.

Read the article.

Posted by zombyboy at March 16, 2004 09:56 AM | TrackBack