, , , , ,

     Let’s examine an article posted on the liberal leaning website “The Daily Beast” in which Michael Medved describes an unanswered question about the coming fiscal cliff and what solutions Republicans and Democrats should strive for http://www.thedailybeast.com/articles/2012/11/24/the-unanswered-question-what-about-clinton-era-spending-rates.html
     Medved aptly points out that among all this talk by Democrats and President Obama specifically about returning to Clinton era levels of taxation in order to reflect Clinton era prosperity, they are neglecting a crucial feature of the Clinton economy. Namely, much lower levels of government spending as a percentage of GDP. Medved shows that let alone increasing income tax rates on the top bracket, even if we were to raise all of the rates to their pre Bush levels, the budget deficit would still be nearly $1 trillion. Medved brings up the fact that at the end of the Clinton era that Democrats and indeed many Republicans wish to return to, government spending as a percentage of GDP stood at 20.6% whereas at the end of President Obama’s first term spending as a percentage of GDP stands at 24.3%.

     The facts that Medved outlines betray the real culprit behind our nation’s current fiscal crisis and it isn’t a few millionaires who aren’t paying their “fair share.” As it turns out the real story is much less cartoonish. Obama has taken advantage of the flaws of democracy and rule of the majority by inventing a scapegoat to blame the nation’s ills on. By targeting the infamous “1 percent” the President knows that he has a winning strategy for the simple, if not painfully obvious, reason that most people are not part of the “1 percent.” Much is made of public opinion polls that show overwhelming support for raising tax rates on the top 1 percent of income earners but this should seem rather odd. Of course most people are in favor of others paying for the benefits that they themselves receive. No headline would ever read, “New poll shows overwhelming support for free stuff at others’ expense” but the rational observer can see that this is essentially the same thing.

     By drawing attention to the red herring of rich who don’t pay their fair share, the President was able to distract from the real cause of our current crisis, skyrocketing government spending. Historically, tax revenues have hovered around 20 percent of GDP so with the Obama administration rounding out its first term with spending levels upwards of 24 percent of GDP we can see that spending and not revenue, is the biggest problem in this equation. In our current period of stagnant growth of less than 2 percent, spending at these levels can be described as clearly unsustainable.
      So where should we start? Should we get rid of PBS like Mitt Romney suggested during the campaign? Eventually yes because public broadcasting is nowhere authorized by the constitution but to suggest this as part of a “solution” to our nation’s fiscal crisis is naive if not stupid. The spending cuts should come from the sectors of government that spend the most money. The military is a certain venue for some real cuts. Many conservatives have fallen prey to Keynesian thought by arguing that cutting military spending will lead to job losses. While this is directly true in that it will cause specific people to lose their jobs, the resources freed up will be put to more efficient use in the private sector and overall employment will not be negatively affected. Jobs lost in the military will be compensated by jobs created in other, more productive areas of the economy. The Department of Defense, CIA, FBI, NSA, DHS, and all of the other “defense” agencies are government agencies just like the EPA, DOE, DOI, etc. Government is wasteful and inefficient no matter what its purpose so if we need to cut all the favored agencies of the left, then we can certainly cut those agencies on the right. The other major area that needs to see cuts is the entitlements. We could balance the budget this year by raising taxes and cutting defense and other discretionary spending but the entitlements would still be out of control. As of this posting the unfunded liabilities of our country, including social security, medicare, medicaid are more than $121 trillion or more than 7 times the value of our entire economy! No amount of tax increases on the rich or anyone else will ever be able to solve this problem. As disliked and demonized as Paul Ryan’s plan to privatize Medicare was, privatization may be the only way for us to maintain these entitlements at all for our aging society short of continuing to reduce benefits and increase taxes indeterminately into the future. In every single instance, privatization makes services cheaper, and more efficient and at this point is probably our only option.

      Whatever happens in the next few months as Republicans and Democrats go back and forth and offer and counter offer we can be sure that very little progress will actually be made. But it is my hope that now that election season is over, maybe we can stop pretending that the disaster that is our federal deficit is the fault of a few millionaires.