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"And ye shall know the truth, and the truth shall make you free." - John 8:32
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Author:  Bob Webster
Bio: Bob Webster
Date:  April 28, 2011
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Topic category:  Government/Politics

Is Federal Spending Sustainable?

While “sustainability” is very much in the forefront of planning activities for a wide range of development projects, there is a curious lack of any public discussion or political desire to examine federal spending for its sustainability. The dominant news media show little concern for fiscal sustainability being applied to reign in out-of-control federal spending.

I began researching material for this commentary more than a week ago (April 21). During his news conference yesterday (April 27), Ben Bernanke, Chairman of the Federal Reserve, repeatedly referred to federal spending as “unsustainable.” So the title question has been answered.

Nevertheless, it is worthwhile to take more than a moment to absorb that information. Just hearing it, thinking, “well, yes, it probably is” and then going on about your business would be irresponsible.

Currently, “sustainability” is very much in the forefront of planning activities for a wide range of development projects. Such considerations as short and long-term impacts on the environment, employment, transportation, and energy are but a few areas where sustainability is an important consideration when planning a new human endeavor. This reflects a real consideration for future generations. It is generally both imprudent and inconsiderate to simply forge ahead with a new project without considering its impacts on future generations who will have to live with the consequences of what we plan and do today.

However, there is a curious lack of any public discussion or political desire to examine federal spending for its sustainability. The dominant news media show little concern for fiscal sustainability being applied to reign in out-of-control federal spending. This is nothing new. Many federal spending programs share common traits:

  • They begin as relatively low-cost limited scope programs with grand objectives.
  • Scope is expanded as new features are added (e.g., new benefits to entitlement programs) as new needs are perceived.
  • They require an ever-increasing supply of taxpayers to cover ever-increasing costs.
  • They reach a critical point where tax revenues must be increased to sustain them.
  • No serious attempt to address these weaknesses can be made without partisan demagoguing that wildly overstates the impact of bringing federal programs into line with revenue.
  • No consideration is given to the adverse financial and living standard impacts on future generations.
  • Just as they ignore constitutional authority of such programs, both the dominant news media and public education at all levels can be relied upon to ignore fiscal sustainability of federal programs.

Looking at the above list, these problems can be seen as the consequence of irresponsible Congresses failing to adequately address the sustainability of such programs.

In short, when it comes to federal spending, “sustainability” is suddenly of no interest to most politicians, the dominant news media, and public education.

When was the last time you saw a hard-hitting investigative report on the looming disaster that federal spending represents to the financial and social stability of this nation?

Even on the rare occasion that such a report might be encountered, it virtually never focuses on “social” or “entitlement” spending programs. Typically, national defense (a constitutionally-mandated program) is the first target for spending cuts!

Politicians have good reason to ignore federal spending sustainability. Any serious effort to reduce spending must necessarily focus on extra-constitutional “entitlement” programs (including, but not limited to, Medicare, Medicaid, and Social Security). Such programs are inherently unsustainable but they have their own voter constituencies that politicians will play to whenever serious attempts are made to reform these programs. Re-election politics dictates that there is simply no politically safe “fix” for costly programs whose implementation was motivated more by a desire to reap beneficiary voter appreciation than to realistically address the perceived problem.

I do not make these statements lightly. Look at the numbers for FY 2010. According to the Congressional Budget Office (CBO), the FY2010 budget exceeded revenues by 37%. To put that into perspective, consider the following analysis:

In 2010 the median US household income was $50,221. If that typical household spent the way our politicians in Washington spent during FY2010, it would have spent $68,803, or $1548.50 per month more than it earned! How long do you think that household could avoid bankruptcy if it spent like that?

The CBO breakdown of spending during FY 2010 shows that the total spent for welfare, pensions (includes Social Security), health care (Medicare, Medicaid), and Education came to 62% of the total budget! Considering that there is no constitutional authority for any of those programs at the federal level, that is quite a huge chunk of our financial problem. It also means that solving our fiscal crisis is not going to be easy. Demagogic arguments that normally attend any serious attempt to curtail entitlement spending will simply prolong the pain and work against realistic solutions.

Federal spending, FY2010
Source:  CBO figures, pie chart

With today’s rapid increase in federal spending (FY2009-FY2011 projected deficits total $4.32 trillion, averaging $1.44 trillion per year - each year’s deficit averaging the total deficits accumulated during the eight years of Ronald Reagan’s presidency when the House and appropriations were controlled by Democrats led by Tip O’Neill!) it should be enough to realize that continued federal spending like this is simply not financially sustainable. Despite the strong effect of such spending on unemployment financial instability, inflation and loss of international faith in the US dollar, many politicians are content to face the looming debt ceiling crisis with a “business as usual” attitude. Such an approach will be disastrous.

Every economic down cycle, whether of recession or depression proportion, puts great stress on federal spending, particularly for entitlement programs as unemployment and economic stagnation both increase demand for benefits while reducing revenue into these programs. It doesn’t take a genius to figure out that continued massive federal spending cannot survive prolonged economic malaise, particularly when it is the very basis for the economic malaise we’re experiencing!

We are in the second great depression of the past 100 years. In both cases, politicians used the economic depression to rapidly expand federal governmental power, which actions prolonged both depressions. This time around, the problem is being exacerbated by an administration hostile to job-creating capitalism and low-cost domestic fossil fuel production. We are told that “Robin Hood” economics works and to get used to bicycles and very expensive electric mini-vehicles, despite a vast abundance of untapped energy reserves sufficient to supply the needs of this nation for more than 200 years!

The current administration has embarked on a bold effort to vastly expand federal power beyond anything authorized by our Constitution. The economic disaster of Obama’s national health care scheme (dubbed “Obamacare”), a program already declared unconstitutional, will severely enhance the financial crisis if it is not defunded and repealed.

Even worse for its recent and ongoing damage to our economy and financial stability has been support of corrupt failing major corporations (take your pick: automotive industry, banking, unions, insurance, etc.) with hundreds of billions of dollars we don’t have. This is being labeled “stimulus” but it is nothing but crony capitalism, payoffs, and political thievery at its worst! At the same time unemployment benefits have been extended time and again when there is no money in the treasury to fund such extensions. None of this constitutes even a partial solution and all of it compounds the problem.

We have reached a point today where federal spending vastly exceeds anything close to what is sustainable. The more a real solution is avoided by politicians playing politics rather than seriously looking for solutions, the worse the problem gets.

There are those who naively believe that raising taxes on “the rich” would be sufficient to bring our budget process under control. That is pure self-delusional nonsense. The numbers simply do not add up. No tax rate on “the rich” is adequate to even dent the continuing deficits. No tax rate on everybody, rich or poor, will solve the problem.

This problem cannot be solved without intelligently devolving entitlement programs to the states or the people where the constitutional authority and responsibility for such planning/programs must reside. Such a move would provide for competition of ideas, the efficiencies of local enforcement, and could give individuals real control over their own lives (e.g., 401Ks & IRAs rather than Social Security; medical savings plans & greater options for competition for health care insurance rather than Medicare and Medicaid; local control of education without federal interference; local control of welfare without federal interference).

The ultimate consequence of doing nothing is national collapse. The burden is simply unsustainable by any process. Printing money simply skyrockets the cost of everything by devaluing the currency (this is what has been going on to fund these massive deficits when nobody is willing to buy our bonds).

If you think the current depression is bad, wait until high inflation kicks in (as it inevitably must). The resulting “stagflation” will be like nothing this country has ever experienced before.

The stakes cannot be higher. We’ve run out of time. That is why it is important that the debt ceiling not be moved one penny unless Congress attaches to it a balanced budget amendment to be sent to the states for quick ratification.

The power exists in Congress to do what is necessary to take the first step toward putting this nation back on track toward its constitutional republican roots. Failure to set aside partisan bickering and deal with this crisis in a meaningful way will be catastrophic to everyone’s standard of living beyond what most people can even imagine.

Business-as-usual federal spending is unsustainable. It’s time Congress acted intelligently to make the tough choices and massive changes needed to solve this problem that they’ve created.

Bob Webster
WEBCommentary (Editor, Publisher)

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Biography - Bob Webster

Author of "Looking Out the Window", an evidence-based examination of the "climate change" issue, Bob Webster, is a 12th-generation descendent of both the Darte family (Connecticut, 1630s) and the Webster family (Massachusetts, 1630s). He is a descendant of Daniel Webster's father, Revolutionary War patriot Ebenezer Webster, who served with General Washington. Bob has always had a strong interest in early American history, our Constitution, U.S. politics, and law. Politically he is a constitutional republican with objectivist and libertarian roots. He has faith in the ultimate triumph of truth and reason over deception and emotion. He is a strong believer in our Constitution as written and views the abandonment of constitutional restraint by the regressive Progressive movement as a great danger to our Republic. His favorite novel is Atlas Shrugged by Ayn Rand and believes it should be required reading for all high school students so they can appreciate the cost of tolerating the growth of unconstitutional crushingly powerful central government. He strongly believes, as our Constitution enshrines, that the interests of the individual should be held superior to the interests of the state.

A lifelong interest in meteorology and climatology spurred his strong interest in science. Bob earned his degree in Mathematics at Virginia Tech, graduating in 1964.

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