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“Our practical choice is not between a tax-cut deficit and budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy; or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues, and achieve . . . a budget surplus.” John F. Kennedy

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May 23 2011

The Debt Ceiling and Fiscal Responsibility

What is with the hysteria surrounding the debt limit? Why are the Democrats refusing to have a discussion regarding the issues surrounding the debt ceiling and fiscal austerity?

It is a fact that all things being equal, a growing economy brings in more taxes than a stagnant or shrinking one. It is a fact that reducing tax rates stimulates growth and leads to greater tax receipts (courtesy John F. Kennedy). It is a fact that we cannot continue on the current path of fiscal irresponsibility (courtesy Barack Obama).

If we want our federal government to have access to more money (I’m not sure I do), then reducing taxes to a point where optimum growth will occur is the best way to achieve that goal, not raising the debt ceiling so we can borrow more every time we max out the national credit card. I concur with John F. Kennedy,

Our practical choice is not between a tax-cut deficit and budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy; or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues, and achieve . . . a budget surplus.

The next step would be to get spending in line. We all know that no matter how much money the treasury has, it spends more. Tax rates could be raised to 90%, 100% even, and not only would our federal government spend every dime of it, but they would certainly borrow against it to finance even more great projects to buy votes . . . ah, rather, to serve the people. I recently wrote about the idiocy of such a plan, entitled The Rich, Taxes, and Government Debt.

The most powerful tool of the politician has become our tax dollars. Our money, taken by the force of law, is spent to buy votes and power, and often in ways that work against the interests of those paying the bill. It only seems fair (the President’s ears should perk right up now) that those who are going to be on the line for this new spending (taxpayers) have the right to require some fiscal responsibility from those doing the spending.

President Barack Obama, in May of 2009, warned that the current level of deficit spending was unsustainable and would lead to skyrocketing interest rates for Americans and have a “dampening effect on our economy.” Of course, that was when it was George Bush’s spending.

Thank goodness we (or some of you, rather) elected a fiscally responsible president; one who did more deficit spending in his first three years in office than all presidents before him combined; one whose budget proposals will not only double our national debt within the next decade, but quadruple the net interest costs of carrying that debt (as a result of those increased interest rates, coupled with increased debt); one whose tax and spend philosophy will cause us to spend more money on interest payments than on “education, roads and all other nondefense discretionary spending combined” within eight years. Yet each year in office he has preached the virtues and necessity of decreased federal spending – 2009, 2010, and again in 2011 – and despite the soothing words, reality bears out a less than soothing picture.

According to budget analysis, “90 percent of the rising long-term budget deficits are driven by rising spending, and just 10 percent of the rising deficits are caused by falling revenues” and our President has admitted that our federal government has a spending problem, yet he is asking Congress for an increased ability to borrow without any limitations on their (and his) ability to continue spending recklessly.

How about this:

In the 1980s and 1990s, Washington consistently spent $21,000 per household (adjusted for inflation). Simply returning to that level would balance the budget by 2012 without any tax hikes. Alternatively, returning to the $25,000 per household level (adjusted for inflation) that Washington spent before the current recession would likely balance the budget by 2019 without any tax hikes.

Simple, really, and the easy part is the President claims to already agree with me.