View 683 Wednesday, July 13, 2011
Friday the 13th falls on Wednesday this month.
The Budget Deficit Dance continues. The problem is summarized nicely here:
Budget woes
Long time subscriber and truly enjoy reading your thoughts on these issues.
I understand that we have enough money to pay for the debt service. However, we can’t truly argue that cutting off social security checks to seniors, for many their only source of income, with no warning or notice would be a healthy thing for the country. That is how revolutions begin.
While I do pay a lot of money in taxes, we also have to understand that we have the lowest individual tax rate in the industrialized world. I certainly don’t support federal bunny inspectors, and we have to root those out, but this type of expense is minuscule compared to the overall federal budget — in fact getting rid of all discretionary spending wouldn’t come close to alleviating our deficit problem.
I think the president’s idea of cutting back some corporate loopholes and cutting spending at the same time makes sense as a first approach. We then have to get the voters to continue to pressure all of our politicians (federal and state) to continue to make progress.
Alex
In other words, there is no choice but to raise revenues. The command economy must continue.
Note that no one is advocating cutting Social Security, although President Obama has used this a a threat to scare Social Security recipients in the hopes that the nation will demand higher taxes rather than cuts in government. Note also that the argument here is that we are undertaxed. We are simply not raising enough revenue. After all. “getting rid of all discretionary spending wouldn’t come close to alleviating our deficit problem.” No, the only solution is to raise taxes, preferably on someone else.
But what is this about “discretionary spending?” While servicing the national debt – of which Social Security is a part, by the way, since the Social Security Trust Fund monies have been spent for years, leaving nothing but IOU’s in the lock box – is not discretionary, what does it mean non-discretionary? Apparently all the entitlements are no longer discretionary. If you have told your children you will give them an allowance, then you lose your job, has the allowance now become a non-discretionary entitlement, something that must be paid no matter that you have to shoplift to get the money? How did all these programs become fixed in stone?
If something cannot go on forever it will stop. If we continue to consider transfer payments like negative income tax, Americans with Disabilities Act enforcement, Head Start, Free School Lunches, Medicare, Medicaid, Free Liver Transplants, Food Stamps, etc., etc., as non-discretionary, as items that cannot be reduced or eliminated, then we will continue to have rising deficits. That can’t go on forever. The more deficit financing, the more the costs of debt servicing – which truly is non-discretionary – rises in proportion to the income, and the more money has to be borrowed. It’s a spiral that has long been out of control.
So the command economy continues. But as I said in my previous essay, command economies distort realities and so badly misallocate resources that the economy dwindles. Recessions become permanent. Recession becomes depression. Economic miracles never happen with command economies. Some economists like to prove they can’t, using information theory; but prove it or not. we don’t see instances of economic miracles under command economies. Yes, there are economic miracles under authoritarian regimes. Franco’s Spain at one time had the highest economic growth in the world. Pinochet’s Chile came back from near economic death under socialism to become a roaring tiger. Both had economic freedom and stability of property. They were politically authoritarian governments, but they were not dedicated to ever-rising state budgets.
Command economies never work. That includes ideologies that transfer ever larger amounts from the productive to the needy. As Margaret Thatcher observed, eventually you run out of other people’s money to give away. And the gods of the copybook headings limp up to explain it again.
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The Republicans would do better to look at what items can become “discretionary” and thus subject to trimming or cutting, than to continue to perform in the Kabuki play being directed from the White House. They need to tell President Obama that, when it comes to living within our means, Yes We Can!
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Lost Boy in Brooklyn
Horror in Brooklyn: an 8 year old boy walking home from the park was taken and killed. The cry goes up, what was this boy doing walking alone? Which says a great deal about the world. When I was young we most of us played in Davis Park, across the street from my house iin Memphis before we moved to Capleville. I was no more than seven. We ran around the block. We played hide and go seek. It was not unusual. But it was a different world.
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