Friday, March 20, 2015

A note to our elected officials: Quit raising the damn debt ceiling!

debtceiling1A special note to our elected officials, quit raising the damn debt ceiling and get the spending under control. The Republicans should hold firm on the existing debt ceiling and let that force the issue of programmatic reductions.

Republicans should be alerting the public to the absurdity of President Obama's call to simply raise the debt ceiling without also discussing spending cuts and tax reform. Apparently the President doesn't recognize that he's digging the nation deeper into debt every day by spending more than we take in.

What better time to throttle back spending and comprehensively reform the tax code?

The shrinking group of hard-working people who actually pay taxes know first-hand that spending less is the first step toward controlling debt. That's how we manage our own budgets.

Republicans ought to borrow a page from the President's simplistic messaging and frame the debt ceiling discussion in such simple terms that members of Congress regardless of party affiliation will be compelled to address an issue that threatens our nation's economic security.

The risk to our economy doesn't come from restricting government, its comes from government.

Conservatives and libertarians want the government to rationalize itself, get back to doing the constitutionally limited tasks assigned to, and restore federalism. We aren't for protecting any particular income group; however, before we're in favor of sticking it to any particular income group so that the federal government can do more and more of the things it does so poorly we want to downsize it and figure out what it really would costs.

Our social insurance programs, Social Security and Medicare, need to be taken off books, the annuity obligations fully funded by the federal government, and then privatized.

Once these things are done, the remaining operations should cost less than 15% of GDP. If that's so, then taxing the rich more is not only unnecessary, it is harmful to the economy.

Try and wrap you head around the concept that the marginal utility of any government spending beyond that needed to meet its minimum obligations are harmful to the economy since they are less impactful than a similar amount of private sector spending. The same dollar can not be spent simultaneously by two parties.

We've been letting the wrong folks spend the money for a very long time, and it has hurt us.

For decades our politicians have listened to Keynesian economist who have extolled the virtue of government intervention into the economy as a way to stimulate otherwise moribund growth. This is non-sense and it always will be.

The only virtue of Keynesian theory is that it gives justification to politicians who want to spend in order to favor one constituent at the expense of another and thus increase their chance of reelection.

Keynesian theory is based on the erroneous belief that somehow government spending will produce a multiplier effect that results in additional growth. This simply is not so because the same dollar can not be simultaneously spent twice and the multiplier effect (this is actually marginal utility in economic terms) will always be lower for public spending than had it been spent by its original owner.

Many Keynesians will argue that we aren't talking about spending the same dollar simultaneously because the additional government spending was financed through debt issuance. However, this is an illusion.

Debt, as evidenced by the latest QE program by the Fed simply devalues our currency through inflation and actually has no long/mid-term impact on total consumption. Over the past few years the money supply has increased about 4.5 times.

Does anyone seriously believe inflation can be avoided? I don't and when it hits future consumption, in real terms, is going to tank. The Fed simply is neither good enough or agile enough to soak up the excess money that it created.

Politicians simply direct spending in an area that is visible and ignore those areas were harm occurs.

For instance, the auto bailout didn't save any jobs, in fact, it probably had a negative impact. Jobs are a function of demand for the product being produced, not some artificial construct that saved union jobs in the upper mid-west at the expense of additional auto jobs in the south.

This is a particularly good example of "concentrated good" and "distributed harm".

Republicans have to ignore public pressure, media pressure, and Obama rhetoric and stand on principle. The problem in Washington is a spending problem; federal outlays have risen 30% since Pelosi and Reid took over Congress. What was sold to us as exceptional spending for the financial crisis became baseline spending. Government knows only one way when it comes to spending: up.

And yet even with the engorged federal presence, it isn't enough--witness the pork larded into the Hurricane Sandy relief bill.

Washington politicians are like alcoholics who believe they don't have a problem. "Just one more drink." Time to put them off cold.

The Republicans need to think about how to be the most effective with what power they have. As we approach the debt limit again the Republican led House should spell out the necessary spending cuts one by one and let the people know that without making the tough choices now we're in for an even steeper fiscal cliff in the future. Some have compared this current fiscal cliff like falling out of your bed but if the debt limit goes on unchecked it will be like falling into the Grand Canyon.

Of the course the President believes that we have no spending problem, and by now it's an honestly held belief. For Obama to accept that we do would beg the question, "well, what do we do about it?", and that in turn would require him to champion cuts in spending, which would gore dependent constituencies he helped create.

So, Obama has convinced himself that we currently spend what's appropriate (except that he wants to spend more) and that balancing the books is either unimportant, as his Krugman-devil whispers in one ear, or to the extent that balancing the books is important it must be done by increasing "revenues", whispers his other Krugman-devil. There is no such thing as a Krugman-angel.)

President Obama used to rail against the unsustainability of Medicare, and claimed that he'd resolved to do something about it before the program was bankrupt. But, time passed, Obama looked around, and concluded that he couldn't make a choice about what to cut without causing pain.

President Obama isn't about causing pain, regardless of the need. So, like all liberals at heart, he's accepted that what we spend cannot be reduced and must be taken as the platform on which we build further spending.

So, it's a perhaps a little surprising to find yourself facing an ideological wall, but there you are. John Boehner's (and his caucus') resolve not to entertain additional taxes except to lower them is good. Boehner will need the resolve.

No comments:

Post a Comment