Cut More Spending; Avoid Bankruptcy
March 29, 2011 Leave a comment
by Lyman Stone
Given the catastrophic and exciting news coming in from around the world, the advance of the anti-Gaddafi rebels in Libya, the nuclear crisis in Japan and the fighting in Yemen and Syria, it seems only appropriate, as the conservative columnist, that I should ignore the popular news cycle and discuss something boring. Therefore, I’d like to harp on everyone’s favorite issue: budget deficits.
Negotiations in Congress over budget cuts are going along at their usual lurchingly painful pace, stumbling along in the graceless course of democracy. The cowardly Republicans have offered cuts of about $100 billion — a good bucket of water to throw on a lava flow of debt. But as paltry as that showing may be, it has at least forced Democrats in Congress to peak out of their blindfold at the sovereign debt crisis around the corner; they’ve offered a teacupful of budget cuts, about $60 billion.
The government deficit is over $1.33 trillion out of a $3.5 trillion budget. A $100 billion budget cut amounts to less than a 3 percent budget cut. That is nothing.
There are a few statistics worth noting. According to the U.S. Debt Clock, unfunded liabilities from Social Security, Medicare and Medicaid amount to, over the next 10-20 years, over $1 million per taxpayer. Do you have $1 million to spare over the next 10 years? Probably not. So who will pay? The rich, you say? Let us say the top 1 percent of earners. Surprise, according to the Wall Street Journal, the top 1 percent of taxpayers already account for 40 percent of income taxes, even though they only earn 20 percent of income nationally.
Merely in terms of current debt, we have the equivalent of $676,000 in debt per family in the United States. That is bad, but it wouldn’t be so bad except that we only have about $7,000 in savings. How, again, do we plan on paying that debt?
There is a myth going around that America has a small government. But we don’t have a small government. We have a huge government. Usually, people cite the number that our government spending is about 30 percent of our gross domestic product — about one in every three dollars is spent by the government.
Now that’s quite a bit, but it isn’t so bad. Countries like Bosnia, Belarus and Belgium have government spending composing over 50 percent of their GDP — half of the commercial activity in those countries is controlled by the government. Countries like France, Sweden, Cuba and Zimbabwe are even worse.
The devil, however, is in the details. That number, 30 percent of our GDP, is not correct. That number does not include state and local spending. Including such spending, about 46 percent of the U.S. economy is government spending. For some perspective, that’s somewhere between Yemen and Ukraine.
I want smaller government. But, really, I’d be okay with the government controlling just 30 percent of our economy. I’d be okay with only having $700,000 in government debt on my back, instead of the $1 million or more it will become at our current rate.
Returning our nation to a point where government spending would compose a mere 30 percent of our economy ($4.2 trillion in spending, though we would still have a small deficit; I’m not even going as far as advocating a balanced budget here!) would require, if we made proportional reductions, $1.23 trillion in federal, $410 billion in state and $600 billion in local budget cuts.
Cutting spending isn’t fun. Bankruptcy is worse.