• Kelly Kleiman

    Rick, This is an excellent summary of a fundamentally misguided activity. Describing government expenditures as “huge debt” doesn’t do justice to the government’s special role in supporting the economy during depression/recessions like the one we’re in now. Of course people cower in the face of “debt” but if the expenditures are described instead as “investments in infrastructure” they understand that the government is doing what it’s supposed to do. I didn’t hear anyone complaining about the “huge debt” run up by the wars in Iraq and Afghanistan so forgive me if I’m skeptical of the budget hawks’ decision to get anti-debt religion when the time comes to cut social programs.

    And please see this wonderful explanation of the real way the Federal government resembles a family. It’s not in living within its means but in allocating its resources properly: http://www.samefacts.com/2011/06/economics/its-not-about-money-and-the-country-isnt-broke/

  • rick cohen

    Thanks for your comment, Kelly. Of course the fundamental question here is our nation’s priorities–or misplaced priorities. Do note that the sponsor of this budget/debt analysis was the Peterson Foundation which is clearly raising the “huge debt” (Hugh Jidette) question rather than asking whether our nation’s resource allocation priorities are correct.

  • David Cearley

    Rick, when you talk about the nation’s resource allocation priorities, you’re talking about other people’s money like it belongs to the government or the nation. A failure to rigidly protect private capital and wealth creation may seriously imperil the nation’s ability to raise tax revenue because progressive policies create massive disincentives to invest, create taxpaying wealth or tax paying jobs. The difference between the most conservative and most liberal plans is about 9.3% of GDP, destroying more than ten percent of the private economy, millions of jobs, and tens of billions in tax revenue, actually compounding our debt problems. Throw in an energy policy forecast to raise electric rates 40-60% in the next four years, and we’re talking massive economic dislocation. Every percentage shift of GDP from the private to the public sector reduces tax revenue, or increases the burden on the remaining taxpayers. At the same time government expenditures are going up. Every government dollar spent has to be extracted from the private sector. Other than government engineered inflation, there is no other revenue source. Current spending is 40% higher than tax revenues. To pay for current spending without debt, would require tax rates to go up 70% higher than they are now. When you consider that only 50% of taxpayers actually pay any income taxes, it quickly becomes clear that we don’t have a tax revenue problem, we have a government spending problem. Meanwhile, the Democratic party hasn’t even offered a budget for the current fiscal year.

  • rick cohen

    Dear David: I do wish the Democrats offered a budget. We have already commented on that. Regarding the rest of your analysis, there are good arguments pro and con as you know. The contentions of liberals and conservatives are all over the airways, whether we need more government or less government spending, whether we should be focusing on creating jobs or reducing the deficit, etc. But some of this comes down to a question of our contrasting visions of government itself– sometimes the blindness that some people have to what government has done and continues to do for them on a daily basis. It makes me think of this recollection from former South Carolina senator Fritz Hollings:

    “A veteran returning from Korea went to college on the GI Bill, bought his house with an FHA loan, saw his kids born in a VA hospital, started a business with an SBA loan, got electricity from TVA and, later, water from an EPA project. His parents, living on Social Security, retired to a farm, got electricity from REA and had their soil tested by the USDA. When his father became ill, the family was saved from financial ruin by Medicare and a life was saved with a drug developed through NIH. His kids participated in the school lunch program, learned physics from teachers trained in an NSF program and went to college with guaranteed student loans. He drove to work on the Interstate and moored his boat in a channel dredged by Army engineers. When floods hit, he took Amtrak to Washington to apply for disaster relief and spent some time in the Smithsonian museums. Then one day he got mad. He wrote his Senator an angry letter – ‘Get the government off my back’, he wrote. ‘I’m tired of paying taxes for all those programs created for ungrateful people!'”

    Thanks for your comments David.