Fiscal Failure: The Looming Disaster

August 10, 2012  by  Clark Barrow

Despite all the talk about cutting spending and getting the U.S. federal government’s fiscal house in order, conservatives have failed to establish any policy victories.  Our debt is still growing. Yet, the slight reductions they have achieved in spending growth rates threaten to put millions out of work, highlighting the devastating economic quandary of either option.

U.S. Congressional Republicans have put up a fight against the runaway spending.  But, they did not win the battle.  Fearing that they would be blamed for a government shutdown, Republicans caved in summer of 2011 and agreed to a deal crafted by the Democrats that established a special committee to cut the budget. In case the group failed, the plan also included an across the board $1.2 trillion automatic budget cut over 10 years in discretionary defense and non-defense spending. Well, guess what? The group failed and the cuts are set to begin in January 2013.

While this sounds good at first, it is not the conservative victory that we all hoped for.  Using the government’s baseline budgeting technique, the cuts will only slow spending increases as they reduce budget increases, not the total funding levels. These cuts will just slow the growth of the spending, not the overall amount!

Even though these cuts only slow the rate of spending increases, the outcry and economic impact is expected to be tremendous.  A 2012 study by the George Mason University found that the cuts to discretionary defense spending will cause the economy to shed more than 2 million jobs that are connected to U.S. Defense Department funding.  While these jobs losses are unfortunate, the failure to make substantial spending cuts will send the U.S. federal debt to unsustainable levels, crippling the entire economy and shattering the dreams of millions of more Americans.

As Congress plays with budget cuts that do not reduce the budget, our real national debt is only increasing.  To make matters worse, our real, true national debt is much higher than the frequently reported $15.9 trillion.  After accounting for the U.S. government’s public debt, federal employee pensions and other retirement benefits, current and expected obligations for Social Security and Medicare, the National Center for Policy Analysis said the U.S. federal government faces unfunded liabilities totaling $84 trillion.  No budget tricks here. These are promises our government has made to its citizens.

Sadly, Democrats have refused to include reforms to entitlement programs in any budget talks. Social Security and Medicare are considered mandatory, non-discretionary items and will continue to grow regardless of the actions of Congress or the White House.  Individuals who paid into these programs should certainly receive their benefits, but our nation must reform entitlement programs before the $84 trillion debt is due over the next several decades.  If nothing is done, millions of retirees will either receive nothing or a reduction in benefits, receiving less than they paid into the system.

We have heard these kinds of warnings before. Well before the mortgage meltdown of 2008, President George W. Bush repeatedly asked Congress to address the fiscal catastrophe that Fannie Mae and Freddie Mac were headed toward.  Congress didn’t listen.  Instead, Bush was stonewalled and when the meltdown occurred, taxpayers paid the price with a $169 billion dollar bailout. Even with all the talk of reform and budget cuts, our government still owns the unreformed Freddie and Fannie. No progress has been made.

Democrats in Congress disregarded the warnings about Freddie and Fannie and they are ignoring the tsunami entitlement spending with Medicare and Social Security that will produce the same kind of results.  If nothing is done to actually reduce federal spending soon, the 2008 bailouts will seem like a drop of water in the middle of a hurricane.

What can we do about this? As Americans who care about the future of our country, we must elect leaders who will address the financial doom that is on the horizon.  The legislative actions that are required will be difficult and may not be good for their careers, but inaction guarantees the collapse of the United States as we know it today.

http://www.ClarkBarrow.com
http://www.americanthinker.com/blog/2012/08/fiscal_failure.html

flamewarrior7
Politicians work for us. We are not ready yet to face our financial problems. We have not experienced enough pain yet. Soon, we will see what we have done to ourselves. It is going to get very very ugly.

kentfromohio

Our leaders, Boehner and McConnell, each have powers to stop the appropriation of money. They could each bring things to a halt until 1) actual budgets are passed, 2) existing rules are enforced requiring bills to be available for review 48 hours prior to a vote, 3) require new rules that no 2000 page bills be passed, 4) nothing is done as long as Obama attempts to bypass Congress via illegal executive orders. Boehner and McConnell have allowed Obama to do exactly as he pleases with almost zero effort to block him.
If Nancy Pelosi were Speaker and Romney President, would she say, “I only control one half of one third of the Government”, or would she go about blocking every single thing Romney tried to do? Same for Reid. The Republicans are back to the Bob Michel days where the Republican leaderships job is to be congenial and assist the Democrats in growing Government. Nothing good will happen until Republicans fire Boehner and McConnell and replace them with effective conservative leaders.

WeRDoomed

Perfectly stated! Conservatives can cry all day about the Lib-Progs in power ruining this country but our real problem is in the Republican Party leadership incapable and unwilling to put up a fight. Forget change at the national level. Things won’t improve even if Romney wins in November as he is no Conservative. Go local to change the Republican Party.

PolishEagle_2
It would be nice if people understood the difference between budgets and appropriations. You can pass all the budgets you want and have no impact on spending. Budgets are plans, guidance. They have no impact on how Government funds are to be spent, since they have no force of law.

Appropriations are different. They must originate in the House of Representatives, be passed by the Senate, and then signed into law by the President. As such they have the force of law and bind the President as to how much money is to be spent and how it is to be spent.
Don’t forget, Nixon tried to sequester funds that he thought should not be spent, but was overruled by SCOTUS. Thus the only role that the President plays in the spending of money is overseeing that it is spent according to the dictates of Congress.

norman1978
The biggest difficulty with cutting the budget is that somebody always has something to lose. The vast majority of Americans understand that our fiscal situation cannot continue, but ask many of them and you will get the reply, “we need to cut down government, but don’t touch my ________.”. From Social security to Medicare to defense spending to education, everyone has their own pet spending. The republican that actually tries to cut these things will be very quickly thrown out of office by his constituents.

Conservative Americans are vast in numbers, but you start taking away the safety net and our numbers start shrinking rapidly. John McCain and his ilk have done us a disservice. They call for cuts in government spending, and then use earmarks as their shining example. This create an illusion for many people that if only we cut back the “wasteful spending” then everything will be right as rain. It won’t be because the wasteful spending is some of the smallest line items on the books.

If we are going to survive fiscally, we have to take a chainsaw to Medicare, Medicaid, education, social security and yes, even defense. The problem is that the majority of Americans have too much invested in one or more of those. No one is going to vote to have those slashed.
I sure hope that I am wrong.

Fear+The+Voices
I’m afraid you’re totally right! Politicians have promised so much to so many that there isn’t likely one cut that can be made without some group being opposed to it. Our demise has been self-assured by our own interests in handouts of one form or another.
I’ll just add that it is a self-serving people who will sacrifice their children’s well being for a little bit of the good life today. As a society we have become a disgrace to the principle of our founders.

Rayzorbak

I’m afraid that we have already passed the “Point of no return”. Too much CORRUPTION. Too little self respect. Too much Vice. Too little Education. Too much Lies and mis/dis-information. Too little Reverence where it is due. Too much “What about ME”.

Ffighter13

The corruption of the political class is beyond belief.The media is nothing more than a political tool of mutual enrichment.To say that we are a nation of law’s is laughable.If we as a nation don’t start effecting real change this situation does not end well for any group.We are devoid of principled leadership.

Suzyqpie

My favorite Thomas Sowell quote, I paraphrase, different people prefer different exercise . The Republicans favorite exercise is running for the hills. The Democrats favorite exercise is kicking the can down the road. The confluence of these two exercises have created this looming disaster. CA is a perfect example of the long term effects of these two exercises. Our politicians know what has to

Styx717

“…the collapse of the United States as we know it today.” This is what obozo wants, and we appear to be ready to help him complete the task. If reelected, we will have to be one of the dumbest societies ever.

Cliffyk
There will be no solution from Washington because any Congressman or President that even suggests a real solution to our fiscal crisis is doomed, and any candidate that runs on a platform of real solutions won’t even get out of the gate.

The best I can hope personally is that they can keep the illusion up for another 15-20 years, by that time both my wife and I will be dead. I fear for our children’s and their children’s futures; but to be honest at this stage of the game some form of hardcore socialism/communism may be the only survival hope future generations have as it will of course ultimately fail, and perhaps something once again providing a foundation for life, liberty and pursuit of happiness will rise from the ashes…

Fear+The+Voices

The Republicans have allowed the Demonicrats to do just what they want; just slowing their pace a bit at times. 0bamao, not getting what he wants has just side stepped Congress, with no opposition from Congress at all — and this should have every American up in arms!

So, by they silence, Republicans have become mostly compliant to the Dumbs. And by not forcing acknowledgement and some sort of action on the issues we face, they have further enabled them to enact a sort of doomsday plan to further their agenda without further discussion.
It’s making it difficult to determine who is the real enemy of the people; those who actively plot our demise, or those who silently sit on their hands and allow them to.

Countryman

There is no reason to think that cutting government spending, particularly the recent across the board cut in the rise of government spending, will result in greater unemployment.

The George Mason University report cited by the author, which predicts 2 million jobs lost due to cutbacks in DOD expenditures, is a red herring. The author of the report, Dr. Stephen Fuller, is a Keynesian, and was paid by the Aerospace Industries Association, a lobbying group, to come up with that dire prediction.
What Fuller and others like him do not understand is that laying off workers in a non-productive industry frees those workers to be hired in other industries that are productive; there may be a temporary bump up in the unemployment rate in the transition period, but the overall effect is a reduction in unemployment as reduced government spending frees up capital in the private sector.

The Keynesian micro-economic analysis (which ignores macro-economic processes) is epitomized in an earlier report by Dr. Fuller – “The Museum as a Source of Local Economic Growth.” Note the “local” aspect of the report. Yes, museums spur local growth, but are in the greater economy a drag on growth, as they are non-productive, and merely redistribute money people would have spent elsewhere to the locality. The exact same phenomenon occurs with the DOD dependent industries.

Yes, cutting government spending will result in some economic dislocation of labor and capital, but the overall effect is to the good; only those who have a vested interest in government largesse see budget cutting as a cause for alarm.

Cliffyk
I agree with my only comment being that even if 2 million jobs are lost so what. My point being what is the alternative other than continuing to spend money we do not have?
When you find yourself in a hole stop digging…

JamesDrouin
Sadly, there are far, far, FAR too few people who agree with you. There are two fundamental economic principles which almost ALL people fail to understand:

a). Before government can put money into an economy, it must first take it out of the economy, and; b). The ‘multiplier effect’ of government spending is, at best, at BEST, is 0.65. A more realistic effect is 0.4 to 0.5.
Jmc
Is it reasonable to expect that politicians — who cement their power by doling out “gimmees” to various groups of people — will jeopardize their hold on that power by cutting the budget and reducing spending? Is it reasonable to expect politicians to voluntarily relax their stranglehold on our freedoms? This goes for Republican as well as Democrat politicians, as a whole Repubs are only incrementally better in this regard. One must have a rather large ego to go into politics in the first place and Washington is like a distillery for power-lust. When people go to Washington and hang out with other power-brokers, their desire for power combines with that of everybody else there and thus intensifies itself. We are at the point where a good half of our population depends on the

Steven Shearon

The Conservatives have been quite effective in defining the root of the problem and what needs to be done to take the necessary corrective measures. The problem is the establishment in both parties don’t understand the severity of the problem and have no desire to understand what exactly needs to be done to save our country. All the establishment cares about is making sure they get a check every two weeks coupled with the expensive perks.
In essence, if they don’t care or wish to continue to be members of the professional ostrich society, then why would they communicate the importance of this issue? In fact, I would argue that they don’t want the populace to be properly informed as it limits the amount they have to spend in earning a return trip to Washington.

It angers and saddens me that our country has continued to send these dunderheads to Washington time and time again. I guess ignorance is bliss.

DanTexas

I am as excited as anyone about electing conservatives to the next congress, but no one should expect them to perform. I don’t. If Rush and others would lead the charge, we conservatives could set the tone – make the demand – for responsible government.
Milton Friedman – ” when you don’t have the right people, you must Make the wrong people do the right thing.”
http://www.americanthinker.com/blog/2012/08/fiscal_failure_comments.html

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