When a Spending Cut is Not a Cut

Politics / US Politics Aug 01, 2011 - 02:52 PM GMT

One might think that the recent drama over the debt ceiling involves one side wanting to increase or maintain spending with the other side wanting to drastically cut spending, but that is far from the truth. In spite of the rhetoric being thrown around, the real debate is over how much government spending will increase.

No plan under serious consideration cuts spending in the way you and I think about it. Instead, the "cuts" being discussed are illusory, and are not cuts from current amounts being spent, but cuts in projected spending increases. This is akin to a family "saving" $100,000 in expenses by deciding not to buy a Lamborghini, and instead getting a fully loaded Mercedes, when really their budget dictates that they need to stick with their perfectly serviceable Honda. But this is the type of math Washington uses to mask the incriminating truth about their unrepentant plundering of the American people.

The truth is that frightening rhetoric about default and full faith and credit of the United States is being carelessly thrown around to ram through a bigger budget than ever, in spite of stagnant revenues. If your family's income did not change year over year, would it be wise financial management to accelerate spending so you would feel richer? That is what our government is doing, with one side merely suggesting a different list of purchases than the other.

In reality, bringing our fiscal house into order is not that complicated or excruciatingly painful at all. If we simply kept spending at current levels, by their definition of "cuts" that would save nearly $400 billion in the next few years, versus the $25 billion the Budget Control Act claims to "cut". It would only take us 5 years to "cut" $1 trillion, in Washington math, just by holding the line on spending. That is hardly austere or catastrophic.

A balanced budget is similarly simple and within reach if Washington had just a tiny amount of fiscal common sense. Our revenues currently stand at approximately $2.2 trillion a year and are likely to remain stagnant as the recession continues. Our outlays are $3.7 trillion and projected to grow every year. Yet we only have to go back to 2004 for federal outlays of $2.2 trillion, and the government was far from small that year. If we simply returned to that year's spending levels, which would hardly be austere, we would have a balanced budget right now. If we held the line on spending, and the economy actually did grow as estimated, the budget would balance on its own by 2015 with no cuts whatsoever.

We pay 35 percent more for our military today than we did 10 years ago, for the exact same capabilities. The same could be said for the rest of the government. Why has our budget doubled in 10 years? This country doesn't have double the population, or double the land area, or double anything that would require the federal government to grow by such an obscene amount.

In Washington terms, a simple freeze in spending would be a much bigger "cut" than any plan being discussed. If politicians simply cannot bear to implement actual cuts to actual spending, just freezing the budget would give the economy the best chance to catch its breath, recover and grow.

Dr. Ron Paul
Project Freedom

Congressman Ron Paul of Texas enjoys a national reputation as the premier advocate for liberty in politics today. Dr. Paul is the leading spokesman in Washington for limited constitutional government, low taxes, free markets, and a return to sound monetary policies based on commodity-backed currency. He is known among both his colleagues in Congress and his constituents for his consistent voting record in the House of Representatives: Dr. Paul never votes for legislation unless the proposed measure is expressly authorized by the Constitution. In the words of former Treasury Secretary William Simon, Dr. Paul is the "one exception to the Gang of 535" on Capitol Hill.

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Comments

gAnton
01 Aug 11, 21:08

Excess Spending Is Not The Disease, It's A Symptom

Generally, whenever you find excessive US government spending, you will find that the causative situation was characterized by some combination of stupidity, special interests, and moral turpitude. This is very complicated because each case is unique, but I will try to give several examples to make my meaning clear.

For example, the US spends more on its military than all the rest of the world together. We have troops stationed in more than 100 countries, and are engaged in a number of covert and overt wars! All this obviously involves much crime and immorality. What is the military threat that justifies such an expenditure? And the military is in fact not used to make the US more secure, but is used to obtain commercial and geo-political advantages. As far as special interests go, just read the writings of ex-general/ex-president Eisenhower (Ike) concerning the "military-industrial complex". He exactly predicted what was going to happen. He warned us, but nobody paid any attention to his warnings.

Another bazaar case is the CIA. Their budget and what they do with the money is highly classified, but I can assure you that much of the money is used in a very illegal and immoral manner in many foreign countries. They also are doing the targeting of radio controlled drone missile bombardments in Pakistan and Afghanistan. These attacks have resulted in the murder of many innocent men, woman, children, and babies. Also, these attacks are war crimes under the Geneva convention.

Probably the most bazaar example is Bernanke's QE programs. Bernanke and his predecessor loaned huge amounts of money to "investment banks" at negative interest rates. Some of the banks loaned the US government's money back to the US government at higher interest rates, but most of it was used for speculation. This caused the crash of 2007, and Bernanke than came to the rescue of the banks that caused the crash. He turned the bankrupt banks into wealthy institutions that could pay their top executives astronomical bonuses and salaries.

The following three facts should serve to illustrate how rotten the situation is:

1. When the Fed buys US government bonds, it doesn't buy them directly from Treasury--it buys them from Goldman-Sax, so that GS gets a healthy cut for being the messenger boy.

2. In federal elections, about half the campaign contributions are made by the big Wall Street banks!

3. The upper 1% of US wage earners get 70% of US wages and they control 90% of the nations private wealth. That doesn't leave very much for the rest of us. The US is not a democracy--it's an aristocracy of the wealthy! (Many of these aristocrats are Wall Street big bank executives. They don't produce anything, but are very well paid.)

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