Waiting for the Hammer and Sickle to Fall
Timothy Birdnow
There is much back-and-forth over the causes of the current budgetary nightmare. Democrats and their lackeys in the media try to blame it on taxes they say are too low. But what is the true story?
It's the spending, stupid!
Bill Wilson from Americans for Limited Govenment puts it in perspective:
http://netrightdaily.com/2011/05/dark-skies-ahead/
"After all, in just 2007, the total budget was just $2.728 trillion with only a $160.7 billion deficit. Now, in 2011, according to the Office of Management and Budget, the budget will be $3.771 trillion with a $1.597 trillion deficit. That’s a whopping 893 percent increase in the deficit in just four years. How can this be, when marginal tax rates are exactly the same as in 2007?
A part of the $1.436 trillion increase in the deficit has been the recession, when revenues plummeted from $2.567 trillion in 2007 to a projected $2.174 trillion for 2011. But that only accounts for $393 billion of the increased shortfall. The rest of it was $1.043 trillion in spending increases.
In other words, 72.6 percent of the problem is too much spending, meaning at least 72.6 percent of the solution must be dramatic spending reductions. In a recent piece for Forbes.com, Louis Woodhill writes that “[b]etween FY 1955 and FY 2008, federal revenues increased by 1.0 percent of GDP. However, federal spending increased by 3.4 percent, causing the federal deficit to increase by 2.4 percent of GDP.”
Specifically, the biggest driver of new spending has been “the rise of the welfare state”. As Woodhill notes, “‘Payments to Individuals’ (both direct and via grants to State and local governments) exploded from 3.6 percent of GDP to 12.7 percent of GDP.”
End excerpt.
And tax increases reduce economic growth, making the defecits even worse. Democrats used to understand this; John Kennedy reduced taxes to spur economic growth, reducing the top rates from 90 to 70% and saw a huge increase in revenue - from $94 billion in 1961 to $153 billion in 1968.
http://www.heritage.org/research/reports/2003/08/the-historical-lessons-of-lower-tax-rates
Yet the position of their party is to increase taxes, because they have wedded themselves to the class warfare tactic and because they want high taxes and high spending, believing that ultimately all money comes from government and that the public holds their cash on loan, a sort of trust endowed by government. They are collectivists, and private ownership ultimately must be abolished. That can only happen through government control of industry, which can only happen through high taxation and high spending.
Cloward and Piven elucidated the battle plan best; overwhelm the system, break it down, rebuild it along socialistic lines.
The system is about to break down; we MUST make some very hard spending choices now, or face ruin. Already social security and medicare have seen their lives shortened; Medicare will fail by 2024 and Social Security by 2036. http://townhall.com/tipsheet/guybenson/2011/05/13/report_medicare,_social_security_going_broke_even_faster_than_expected These huge entitlements - the bulk of our fiscal woes - will mean an end to the United States as we know it if they fail. They must be reformed now, but the Democrats resist and demogogue any efforts to fix them. Partly they hope to benefit from the fear of changing the system, partly they hope to break it. Either way, they are absolutely despicable.
There really are only two terrible options if we continue to drift:
1. We default. Default means we never get any credit from anybody, and the nation will likely be partitioned as the individual states would have to stop doing business with a government that cannot pay their debts.
2. We print money to pay our debts, giving worthless script to creditors, thus cheating them. This would likewise be disasterous (Wiemar Germany used this option during the Depression) because, as in a default, nobody gets paid, except in theory. It's like paying with monopoly money. Credit dries up, faith dries up, the states have to fend for themselves.
One thing is certain; America is finis as a world power. We likely won't even be a regional power. We won't be able to pay for ships, planes, anything.
In any event, the likelihood of America surviving this catastrophe is dim; we must fix the problem NOW, not ten years from now. When America can no longer make Medicare payments in 11 years the public will revolt. Too often such revolts are the precursor to despotism.
But, then, perhaps that is what some of our friends on the Left have had in mind all along?
There is much back-and-forth over the causes of the current budgetary nightmare. Democrats and their lackeys in the media try to blame it on taxes they say are too low. But what is the true story?
It's the spending, stupid!
Bill Wilson from Americans for Limited Govenment puts it in perspective:
http://netrightdaily.com/2011/05/dark-skies-ahead/
"After all, in just 2007, the total budget was just $2.728 trillion with only a $160.7 billion deficit. Now, in 2011, according to the Office of Management and Budget, the budget will be $3.771 trillion with a $1.597 trillion deficit. That’s a whopping 893 percent increase in the deficit in just four years. How can this be, when marginal tax rates are exactly the same as in 2007?
A part of the $1.436 trillion increase in the deficit has been the recession, when revenues plummeted from $2.567 trillion in 2007 to a projected $2.174 trillion for 2011. But that only accounts for $393 billion of the increased shortfall. The rest of it was $1.043 trillion in spending increases.
In other words, 72.6 percent of the problem is too much spending, meaning at least 72.6 percent of the solution must be dramatic spending reductions. In a recent piece for Forbes.com, Louis Woodhill writes that “[b]etween FY 1955 and FY 2008, federal revenues increased by 1.0 percent of GDP. However, federal spending increased by 3.4 percent, causing the federal deficit to increase by 2.4 percent of GDP.”
Specifically, the biggest driver of new spending has been “the rise of the welfare state”. As Woodhill notes, “‘Payments to Individuals’ (both direct and via grants to State and local governments) exploded from 3.6 percent of GDP to 12.7 percent of GDP.”
End excerpt.
And tax increases reduce economic growth, making the defecits even worse. Democrats used to understand this; John Kennedy reduced taxes to spur economic growth, reducing the top rates from 90 to 70% and saw a huge increase in revenue - from $94 billion in 1961 to $153 billion in 1968.
http://www.heritage.org/research/reports/2003/08/the-historical-lessons-of-lower-tax-rates
Yet the position of their party is to increase taxes, because they have wedded themselves to the class warfare tactic and because they want high taxes and high spending, believing that ultimately all money comes from government and that the public holds their cash on loan, a sort of trust endowed by government. They are collectivists, and private ownership ultimately must be abolished. That can only happen through government control of industry, which can only happen through high taxation and high spending.
Cloward and Piven elucidated the battle plan best; overwhelm the system, break it down, rebuild it along socialistic lines.
The system is about to break down; we MUST make some very hard spending choices now, or face ruin. Already social security and medicare have seen their lives shortened; Medicare will fail by 2024 and Social Security by 2036. http://townhall.com/tipsheet/guybenson/2011/05/13/report_medicare,_social_security_going_broke_even_faster_than_expected These huge entitlements - the bulk of our fiscal woes - will mean an end to the United States as we know it if they fail. They must be reformed now, but the Democrats resist and demogogue any efforts to fix them. Partly they hope to benefit from the fear of changing the system, partly they hope to break it. Either way, they are absolutely despicable.
There really are only two terrible options if we continue to drift:
1. We default. Default means we never get any credit from anybody, and the nation will likely be partitioned as the individual states would have to stop doing business with a government that cannot pay their debts.
2. We print money to pay our debts, giving worthless script to creditors, thus cheating them. This would likewise be disasterous (Wiemar Germany used this option during the Depression) because, as in a default, nobody gets paid, except in theory. It's like paying with monopoly money. Credit dries up, faith dries up, the states have to fend for themselves.
One thing is certain; America is finis as a world power. We likely won't even be a regional power. We won't be able to pay for ships, planes, anything.
In any event, the likelihood of America surviving this catastrophe is dim; we must fix the problem NOW, not ten years from now. When America can no longer make Medicare payments in 11 years the public will revolt. Too often such revolts are the precursor to despotism.
But, then, perhaps that is what some of our friends on the Left have had in mind all along?
posted by Timothy Birdnow | 6:57 AM
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