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It’s the spending, stupid!

Posted by Richard on July 11, 2011

So far, John Boehner is hanging tough on his "no new taxes" pledge. But can we count on him and the GOP establishment to continue to do so? I certainly hope so, but I think it depends on people like you and me keeping the pressure on.

The President is arguing that trillions of dollars in tax increases must be part of a "compromise" solution to the deficit problem, along with a significant bump in the debt ceiling. So he's basically arguing that the government must be allowed to borrow more, tax more, and spend more. That's irresponsible, immoral, and outrageous. 

The Fiscal Year 2007 budget (the last budget before the Democrats took over Congress, and subsequently stopped passing actual budgets at all) was about $2.7 trillion. FY 2011 spending will be about $3.8 trillion, with a deficit of about $1.6 trillion. So about $1.1 trillion of this year's deficit is due to the massive spending increase, and about $0.5 trillion is due to the drop in revenue. 

Or to put it another way, for more than 50 years, with rare exceptions and regardless of tax rates, federal revenue has remained around 17-19% of Gross Domestic Product, and spending has been about 18-20% of GDP (see here for historical data). But the Obama administration (with a kick-start from Bush, when his Treasury secretary, former Goldman Sachs CEO Hank Paulson, threw him into a panic in late 2008) has exploded federal spending to more than 25% of GDP. And he now wants to claim that that's the new normal, and raise revenues to match. 

It will never happen. The 17-19% of GDP revenue number has persisted regardless of whether the top marginal tax rate was 28%, 39%, 50%, or 70%. Contrary to the wishful thinking of the left, tax rates affect people's behavior, and if tax rates go up, they just adjust their affairs to reduce the bite.

Right now, due to the recession, the revenue rate is unusually low, at around 15%. Personally, as a libertarian, I think that's more than enough (the Christian God only asks for 10%). So I signed on to WorldNetDaily's No More Red Ink campaign, which opposes any increase in the debt limit. That wouldn't cause a default or world-wide crisis, as the MSM would have you believe. It would simply require the federal government to reduce expenditures to match its revenues. I think that's a good start. 🙂

But in the spirit of compromise, I'd settle (for now) for this: cut federal spending back to its historical average of 19% of GDP in return for increasing the debt limit by enough to accommodate the difference between that and expected revenue (at current tax rates) for the next two years. As long as it's coupled with a significant roll-back of all the new federal regulations, which (along with the burden of massive federal borrowing) are one of the reasons the economy is so sluggish (and thus revenue is so far below the historical norm). 

So here's what you do, Speaker Boehner: Pass a bill that (1) caps federal spending at 19% of GDP and raises the debt ceiling by however many hundreds of billions that amount is above the projected revenues for FY 2012-2013, and (2) rescinds significant portions of the economy-stifling regulations the Obama administration has enacted in the past 2.5 years. Then dare the Senate to reject it or the President to veto it. Make it clear to both that there is no Plan B — it's a take it or leave it proposition. 

My friends, we can't continue on our current path. And we can't allow federal spending of 25-26% of GDP to become the new "baseline." At a minimum, we have to go back to the historical norm of 18-19% of GDP.

Preferably, we should simply refuse to increase the debt ceiling and force the federal government to cut expenditures to match current revenues (as a first step to fiscal sanity). That's really all that not increasing the debt ceiling does: it imposes a "balanced budget amendment" (which lots of Republicans claim to favor) immediately. No need for a Senate super-majority or ratification by the states. All it takes is for the House of Representatives to not increase the debt ceiling.

I have little hope that the Republicans have enough stones to go that far. But maybe if we keep the pressure on, they'll at least pass a bill along the lines of my compromise proposal. 

Sign onto the No More Red Ink campaign. And go to AFP's SickOfSpending.com to get your free "Cut Spending Now" bumpersticker. Membeship is free, but if you make a donation, you can choose to have the corresponding number of bumperstickers distributed on your behalf or sent to you to distribute. 

I know you've heard this before (and with far less justification), but it really is for the children. And the grandchildren.

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6 Responses to “It’s the spending, stupid!”

  1. Rick Shultz said

    Hey Richard, hang on just a second here. What’s this WE stuff? You need to remember that YOU’RE still able to work. And this take it or leave it attitude you want to lay on an African

    Colonial Marxist who will call your bluff and veto that no plan B bill you want the Republicans to

    lay on him is gonna get ME dead. I don’t know about YOU, but I NEED that paltry 1100.00 a

    month to buy insulin to keep my diabetic ass alive. Oh yeah, wait, I COULD sell my car for that next bottle of insulin and that next prescription for amlodipine, lasix, lisinopril and all the other medications that keep me alive. Of course I don’t know how I’ll manage to pay my utility bills or buy food or gasoline. I guess I’ll have cross that bridge when I come to it won’t I? It’s easy for people who don’t depend on this government for their very survival to say take it or leave it, but

    that son of a bitch sitting behind that desk in the Oval Office is crazy, and I think “we” better damn well come up with a plan B and it better be one HE can live with, or I’M gonna be in a

    shitload of trouble come August! And don’t tell me that my health problems are MY fault either

    because dammit they’re NOT! I inherited them from my father, and I’m doing my damndest to deal with them as best I can. And without the Social security disability benfits that I worked for a whole lot of years to earn I don’t have much of a chance. Boehner can’t come up with a plan that he can FORCE Odumbo to accept for the same reason Custer couldn’t lug 800 pound Gatling guns around. Too much inertia. Only in this case it’s political inertia.

  2. David Bryant said

    Today (Tuesday, July 12) Senator McConnell proposed delegating the authority to raise the debt limit ceiling to the executive branch. It looks as if the Republicans are blinking first.

  3. rgcombs said

    Rick, chill. You’re buying into Obama’s doomsday rhetoric — “I can’t guarantee Social Security checks will go out in August,” my ass. You were getting disability checks before Obama exploded federal spending by 40%, weren’t you? So if all that new spending has to come to an end (as it damn well must!), what makes you think it’s panic time?

    If the Spender in Chief is as crazy as you think and vetoes anything that doesn’t raise taxes and let him keep borrowing and spending without limit, the government doesn’t just shut down. It keeps operating at the current revenue level (tax dollars are still coming in every month, for cryin’ out loud). The so-called entitlement programs, including Social Security, would be the last things affected. Meaning they wouldn’t be. Any attempt by the Spender in Chief to change that would be shut down so fast and in such a bipartisan fashion, that Obama’s head would spin.

    David, I saw that story and almost puked. McConnell is the poster boy for what’s wrong with the Republican Party.

  4. Rick Shultz said

    Richard I don’t think I’m “buying into rhetoric” here. I don’t “think” the Lunatic In Chief is crazy,

    I KNOW he is, and he’s got powers that scare the hell out of me and they should scare the hell

    out of YOU too! I have always believed that you are a realist and not prone to ignore unpleasant

    facts, so let’s look at some unpleasant facts together shall we? Unpleasant fact #1 — This man is crazier than Lincoln was, and Lincoln was as batty as a church tower. Unpleasant fact #2 — He

    has the same power Lincoln had to declare martial law and something tells he would use it if he

    thought he had to. Unpleasant fact#3 — He controls an army that has had 10 years of the most realistic training in the world on how to control civilian populations. Unpleasant fact#4 — He has

    less respect for the Constitution than Lincoln had which was ZIP! Add all these facts together and

    what we have here is a maniac who do can pretty much what he wants to. Does this remind you of anyone in particular? And if this does happen, the world can pretty much kiss freedom goodbye. And the only thing that could save us from him would be an individual with the skills

    of Carlos Hathcock and the mindset of John Wilkes Booth. And since such an individual probably doesn’t exist, I think we would simply be fucked. So you see the issue for me isn’t simply would my disability benefits be affected. That’s really a small part of a much wider scheme

    of things. We are talking about an individual here who has done NOTHING he promised he

    would do(unless you count his catastrophic “healthcare” plan) and EVERYTHING he promised he would NOT do. The situation is such right now that all the republicans need to do to make this moonbat snap and do something really nasty would be to frustrate his grandiose plans on this issue. I’m not panicked really, I’m just resigned to losing everything I have, and I guess I took it out on you which does neither of us any good. And I dearly hope you are right and we at least get out of this with the status still “quo”, but those who know me, including you, know that am not an optimist.

  5. Tabacco said

    Why is it the Republicans only complain about spending when a Democrat is in the White House?

    Bush doubled the National Debt, fought Wars we did not need for Reasons that did not exist. Now nobody, Dem or GOPer, will tell the Truth about Social Security – the government owes Social Security $2.6 TRILLION (Soc Sec showed a Profit every year since its inception until 2010). Now everyone forgets the alleged “Trust Fund” the government is supposed to hold for Social Security. I’ll bet no Interest is involved!

    Every time the subject of “Cutting the Bush Tax Cuts for those making over $250,000 per annum”, some GOPer steps up to a mic and says, “This is not the time to raise taxes!”

    A POX on both Parties! Why would anybody want to return to those 8 Horror-Filled Bush years! Please explain how helping the Rich and dumping on We The People is going to make America better.

    Republicans had 8 years to CUT THE SPENDING! All they did was cut Taxes for the Rich! There is no Trickle Down. There are no Jobs because they have been OUTSOURCED! The Wealthy are not spending, not investing and not contributing to a RECOVERY! Why in tarnation would even more money in their pockets help America.

    Please explain that in simple Economic terms so we the people can understand how this works!

    Tabacco

  6. Tabacco said

    HOW TO TALK OUT OF BOTH SIDES OF YOUR MOUTH AT SAME TIME AND DUPE AMERICA!

    Republican Mantra: “WE WILL NOT RAISE YOUR TAXES!” & “WE MUST CUT SPENDING!” – Sophistry at its WORST!

    When they say “cut spending”, they mean Entitlements: Social Security, Medicare, Medicaid, Public Education. That’s all the Poor & Middleclass get from Capitalism – Entitlements! If you cut Entitlements for Poor & Middleclass, it’s the same as RAISING TAXES on the POOR & MIDDLECLASS! A rose by any other name!

    We don’t get Jobs anymore because Big Biz outsources them to India, Philippines etc. “As GM goes, so goes America” no longer applies! All We the People have is Entitlements!

    What Republicans mean actually is, “We won’t raise Taxes on the Rich!”

    You guys need to cut the Crap!

    Tabacco

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