The federal budget is grossly unbalanced, and the already excessive tax burden is, on our present course, going to get even worse. Federal taxes and spending disrupt a free economy, discourage savings (and thus
encourage risky investment), and foster a climate of cronyism and corruption. The only solution is to re-define the role of government—to protect freedom. By reducing (toward a goal of eliminating) most of the federal bureaucracy, commerce can be put back into the hands of the American people. Likewise, welfare (charity) should return to the people, and their local and state governments. Expecting the federal government to manage these matters effectively is dangerously naïve. If we are serious about balancing the budget, we must also recognize that our military presence around the globe is un-affordable and unnecessary.
To provide some background: David Walker, who heads Congress’ Government Accountability Office, asserts
that at our present course, the national debt could reach $46 trillion or more within a few decades.1 That’s an insurmountable debt to pass on to our children. Ronald Reagan’s Grace Commission found in 1980 that the
federal income tax was being spent entirely on paying down interest—not even principal, but interest—on the national debt. That figure is somewhat lower today, but clearly, not for long. We must get our budget under control if we are to sustain our economy.
We cannot borrow money from abroad indefinitely, and indeed, the more we do, the more our national sovereignty is jeopardized as the dollar becomes subservient to foreign currencies. The borrower is always subservient to the lender.
There are two critical steps we must take to reclaim our prosperity. The first step is simple: we must reduce our budget. The military spending and the health care/welfare spending comprise the glut of it, and in both areas, the government spends far more than it should.
The second step is less obvious: we must return to sound monetary policy. Presently, we allow the Federal
Reserve to create money from thin air, we allow banks to loan money far above the assets they have on hand,
and we allow our government to borrow money with almost no limit. The effect is as if we as individuals were to borrow thousands of dollars a day—we could live affluently, until the bills come due, at which time we would be bankrupt. This policy, on a national scale, is extremely dangerous and totally unsustainable. I discuss this issue in more detail on my website.2
If Congress can muster the resolve to cut spending, then and only then can we cut taxes. Otherwise, the government will continue to depend on credit and inflation to keep its checkbook balanced. That would be no solution at all. Once we reduce federal spending, the economy will begin to head in the right direction again.
