Life in the fast lane

With the national debt sitting at 13.7 trillion dollars, the president and minions (not onions, but those 535 legislative folk elected by us) are "fighting" for us trying to come to a deficit reduction agreement. Will this work?

The Republicans want to accomplish budget balancing without increasing taxes. The Democrats want the wealthier among us to pay more. The Republicans want drastic cuts in spending. With a budget deficit at roughly 1.5 trillion dollars both seem to have a mathematical arguement.

The rub is they are not talking about balancing next year's budget. They expect us to believe things will get better if they take 10 years to get to balance. That means there could be an additonal eight to ten trillion added to the national debt before the budget is ever balanced. With the current national debt equal to our current Gross Domestic Product and Moody's bond rating service downgrading our debt instruments publicly, how can we rationally expect to sell that much new debt over the next ten years? At what interest rate? Who will buy it as an investment expecting a rate of return and return of the principal amount?

The current budget "negotiations" will result in a market for U.S. Treasury securities limited to those with ulterior motives. Those who want a position that will give them power over the United States. The average investor will not want to take the risk becasue they cannot afford it. The average financial terrorist will have the finances to take the risk and the inclination to press the advantage. That is to dictate to the debtor nation policy, economic decisions, etc. Think it can't happen?

We have engaged in deficit spending for decades and have little tangible to show for it. The attempt to create a socially less riskye society was noble to the more charitable of us, but left us with a deteriorated education system, less manufacturing capacity and jobs, and loss of control of our financial resources since we have to pay the debt service and entitlements first. We borrow just to stay even.

Nothing short of immediate budget balance will yield a tangible financial benefit in the near future. That is a long shot for one reason. The government is too big to control. Try asking people from who and from where one would get a consolidated statemnet of operations for the federal government. How much was the deficit really? All the information that is published is estimated long after the fiscal year is closed. There is no set of documents that a leader can sit down to review with his department heads and say "you are over budget, get it fixed now!!!!!!". That is how any CEO leads his "successful" company. If this can't be done by the federal government and done now, then it is too big to control. It must be smaller
and manageable.

It is against this background that the current negotiation in the government should be viewed. Think its impossible? Only if you don't try. It would be drastic action. It may have to play out over a budget year. But it most certainly must be the yardstick against with all candidates in 2010/12 are measured.

The Deficit From the Bottom Up

It seems the federal deficit has become the new version of American Idol. We started with great interest in the subject, then after week after week of exposure to this topic, we get saturated with the coverage (or exposure) and flip the channel to another video diversion. To complete the analogy, maybe the appropriate replacement programming would be ABC's "Wipeout".

The Constitution dictates that all revenue bills originate in the House of Representatives (Article 1 Section 7). Simply put, the House of Representatives does the budget and initiates all spending bills.

One of the cornerstones of conservative thought is that taxes should be as low as possible. The wisdom of that position is that you leave more money in the pockets of the people that earned it and they will spend some (increased economic activity, higher tax revenue) and they will save some (more money flowing in to banks, some of which can be loaned to companies and citizens who spend it, thus creating economic activity that is taxable also).

When you hear talk about the size and chronic nature of the deficit, the debate almost always comes with a call for lower taxes creating higher revenue. A few lone rangers (Senator Coburn comes to mind) stay on topic and bring up spending but most don't. That's exactly backwards and the heart of the problem.

The representatives of the people can establish taxes, which is the bureaucracy's balanced budget spending amount. If taxes are deemed to high, the people's representatives vote to lower them and spending must be adjusted accordingly. Our politicians have corrupted the process so we think of spending as a separate issue from revenue. No one (or not enough) has the courage to battle spending down to the revenue level. If you watch the news, the greatest amount of air time is devoted to the spending bills. That exposure causes the elected officials to "protect" the current spending levels no matter what. If it fits within government revenues, that's fine. If it doesn't, thou shalt not reduce spending. Although the preceding seems to be carved in stone, no one holding the stone tablet can be remotely compared to Moses or his higher higher up authority.

We can't solve the deficit because the political debate has been hijacked by those who would narrow it down to only a small portion of the issue. Revenue? Don't increase taxes to cover spending. Spending? Don't cut it to match revenue, just establish what is off limits, add lip service to cutting what is left, and leave the gap (known as deficit) to be reported and subsequently buried in arcane reporting of actual numbers and ignored by the politicians and citizens alike.

Please note that many states and municipalities have a balanced budget amendment in their Constitution or city charters. The one's that don't are making news for another reason these days. I refer to the "b" word, bankruptcy. Laugh, chortle, and guffaw at Oklahoma all you want America. We have such an amendment. The same with the other states who require living within their annual income, and champion not using a giant credit public card. When California, New York, and maybe our Federal government are in default or filing bankruptcy, the rest of us will be chugging along in life minding our checkbooks.

Once again the wisdom of the little common man and woman (please note veiled reference to traditional marriage here) will triumph.