Archive for the ‘National Debt’ Tag

Lela Asks: Why Stay Like This?   2 comments

Lela Markham Davidson Ditch Corrected

Last week, Thom Stark responded to a reader who objects to his tax money being used to provide grants for infrastructure or services that, he felt, government shouldn’t even be involved in. Today, I’m going to touch on that topic, but then turn to the larger topic of whether what we’re doing currently is even sustainable.

Thom, I’m going to surprise you and agree that earmarks are a better system than what has replaced them since the big “bridges to nowhere” scandal. This is my nod to our modern-day reality of the federal government stealing from individuals in the form of taxes, thus impoverishing the states and forcing them to rely on federal revenue sharing which looks a great deal like welfare payments. If this is the way things must be (and they are at the moment), then earmarks make sense. Congress gets to direct the moneys to specific projects in specific states for specific purposes. Senators and representatives are elected from their states for the purposes of “bringing home the pork”. In theory, Senators are all equal and get a chance to lobby for their own earmarks. Of course Ted Stevens was, by virtue of his longevity in the Senate, more equal than others in committee assignments and that made Gravina Island bridge (which the Gravina Island residents did NOT want) possible. When Mark Begich replaced Uncle Ted, that longevity and the federally-funded projects that came with it went away. And, I say, good riddance. Alaska needs to disentangle from federal revenue sharing and plan for our future.

But the subject is earmarks and Congress bringing home the pork to their home districts.

These days, of course, they can’t really do that. The flap over earmarks was a long time coming and needed to occur, but Congress got the wrong impression from the criticism. It’s not “earmarked” funding most people hate; it’s the out-of-control spending. States must balance their budget by law. The federal government has no such requirement. In 2006, the country was only $8 trillion in debt and people were fed up. At 62% of GDP, anyone who has ever balanced a home budget knew we were in trouble. Earmarks took the limelight, but war spending and entitlements are what were and are driving the debt. Because earmarks became a dirty word, Congress now directs the funds as block grants for specific types of funding and leaves it to the Executive branch to determine the allocation of those funds. In other words, they gave more power to the Executive branch and furthered the imbalance of federal power while ceding their own tradition authority. And look what the Obama administration did with that new system? We are now $18 trillion in debt, which is 103% of GDP. To “solve” this problem, Congress is now considering a competitive funding system, at least for transportation infrastructure. I can see it now. The states that hire the best PR firms to write their grant applications will get more federal dollars. Poor states will become poorer and rich states will become richer — at least until the wheels come off the federal spending bus.

Earmarks were not the problem. Spending was and is the problem. And that is the larger conversation.

Yes, it is the way that it is now, but should it be that way? Why couldn’t it be some other way? It was once.

Before there was a federal income tax, the federal government was small and pretty efficient. We weren’t at war all the time because the federal government couldn’t afford to start wars. States raised their own revenues and used them on things of local and state interest. Roads got built, there were hospitals and museums, and churches took care of the poor. It was only with the 1914 passage of the Income Tax Amendment that the federal government could afford to start a war and it celebrated by starting World War 1. Yes, I know the war started in Europe, but the US prior to its official entry in 1917, spent three years egging the Europeans on, supplying the British and basically waving a red flag in the face of Germany, asking them to attack our bomb-carrying merchant ships. Our government did the same thing prior to World War 2. There’s nothing like being on a near-permanent wartime footing to make people think they should pay their taxes and bargain away liberty for security. Never let a crisis go to waste, after all.

The downside to federal income taxes is that states cannot derive sufficient revenue from state taxes. There is a limit to how much people can pay in taxes and still support their own lives. Because state legislators must face the public on the streets of their home towns, they are loath to raise taxes too much. So states require revenue sharing from the federal government, which makes no sense to me because the money is coming from their residents, bypassing them and then returning from the federal government. It provides a disconnect in people’s minds. Everybody wants cool federally-funded projects in their district and they applaud their states for lobbying to get them, while at the same time struggling to pay their bills because the federal government and then the state takes so much of their income in taxes. It’s a vicious cycle of taxation and spending.

Well, all that spending is catching up to us. There’s all that debt, which will take decades to pay down, IF we stop deficit spending soon, but worse, our entitlement system is on the verge of collapse. We’re approaching $90 trillion in unfunded entitlement liability, which is more than 200% of GDP. Sooner or later, this house of cards is going to come crashing down unless we seriously change the way we do things on the federal level.

So, you say “this is the way things are; live with it.” I look at the looming fiscal disaster coming our way and say “we can’t live with it because it’s unsustainable. Something must change.”

But what?

Everything these days is a 3rd rail. The politicians insist we can’t reduce Social Security, even though it is the single greatest revenue suck in the domestic budget (Medicare is almost equal to it). The politicians say we can’t reduce military spending because ISIS is going to sail up Chesapeake Bay with a squad of suicide bombers. Sequestration means we have to close the Washington Monument and that makes tourists grumpy. So we play around, reduce deficit spending from $1.1 trillion to $980 billion (otherwise denoted as a reduction of $3 billion) and pretend a drop in an ocean is a fix. The half of the country that wants to believe that the gravy train can keep going forward accepts the propaganda and says “we’re reducing the deficit. Isn’t it wonderful?” and make those of us who passed basic math in high school wonder if societal IQs dropped suddenly while we were reading Bastiat.

Yes, technically we are reducing the deficit, but the debt continues to grow and it is the debt that will eat our liver some time in the near-future. The solution will not be found in raising tax rates on the “rich”. You could tax everyone making a million dollars or more a year at 100% of their income and come within a couple hundred billion of closing that budget gap, but the next year, the “rich” will all have renounced their citizenships and moved to Malaysia or gone bankrupt.  You could tax corporations more, but they would do the same thing, taking more American jobs with them to Malaysia.

Thom StarkEngland’s history is indicative of what happens when you try to tax your way out of a spending problem. The British Empire used to be a great deal bigger than it is today and much more powerful, until they taxed their prosperous citizens into bankruptcy and emigration to support perpetual wars and welfare programs. Now the taxes rest on the soldiers of the middle class who cannot afford to leave  and their children are starting to espouse libertarian philosophy. This isn’t just happening in England, but there are political trends suggesting Europeans generally are beginning to rethink the socialist nanny state. They’re much further down the road than we are, so it is harder for them to define let alone find the exit, but they have many of the same issues that we do and some of them are thinking the solution won’t be found in government growth, but in a return to classical liberalism.

Yes, this is the way things are, but that way is not sustainable. It isn’t the fault of one political party or the other, or one president or the other … it is a systemic problem that needs to be addressed before the federal fiscal bus goes over a real fiscal cliff and takes the economy with it. My income and retirement are tied up in the economy, so — yeah, I care what happens to it. I would think you would too.

 

Lela Markham is the author of the epic fantasy The Willow Branch and the soon-to-be-released apocalyptic dystopian Life As We Knew It, which will explore many of the issues Thom and I touch on in this conversation.

The Libertarian Ideal

Voice, Exit and Post-Libertarianism

CRAIN'S COMMENTS

Social trends, economics, health and other depressing topics!

My Corner

Showcasing My Writing and Me

The Return of the Modern Philosopher

Deep Thoughts from the Shallow End of the Pool

Steven Smith

The website of an aspiring author

thebibliophagist

a voracious reader. | a book blogger.

cupidcupid999

adventure, art, nature, travel, photography, wildlife - animals, and funny stuff

Republic-MainStreet

The Peaceful Revolution Liberate Main Street

%d bloggers like this: