CUT THE BUDGET
Why Cutting the Federal Budget is the Only Answer
"A government big enough to give you everything you want is strong enough to take everything you have." – Thomas Jefferson
When a friend of mine lost her job, the first thing she did was to sit down with her two teenage daughters and figure out where to cut their budget. She hoped to find a job soon, but wanted to buy herself time, in case it was more difficult to find something that would work. Smart people know we can’t live beyond our means. Credit card debt is incredibly expensive; those who keep within their budget do much better in the long run.
The Fed is Different
Or, at least, they think they are. We don’t have a Balanced Budget Amendment to make our leaders accountable. Both parties typically spend wildly, and even when they claim to “cut the budget,” all this means is that the don’t give the various line items as big a raise as they asked for. That’s not cutting the budget.
The Biden administration (and likely, the Harris one, if she were to win) thinks the right approach is to print more money. This means that every dollar you earn is less valuable, based on how much “funny money” they print. This methodology allows them to think it is valid to spend more money than the Fed receives in income tax. They call this Modern Monetary Theory and I suspect, no real economist would vouch for it.
We are in a recession, even if they won’t admit it. We have sinking financials, more unemployment (carefully masked by not counting those who no longer seek a job or are no longer covered by unemployment insurance), lowered output and reduced investment. The Fed is the secret to politicians’ shell game. They tend to win when they are handing out door prizes, which we need to stop demanding. As we get more from the government, our own money purchases less.
We fund industrial expansion in foreign countries and they hold US dollar assets as collateral to “allow” them to expand their own credit. The US is often then out-competed on price, so we have fewer exports and higher imports. It doesn’t balance out. Because the Fed decided to hold a lot of banks’ bad paper, these assets and many US loans aren’t worth all that much.
The Tipping Point
Per Jeffrey A. Tucker, founder and president of the Brownstone Institute, the bubble is popping while the Fed tries to mop up all the liquidity they created. They attempt to slow inflation while stopping the financial meltdown, but the Fed can only do one or the other. If the Fed can’t do it, the only option is to stop spending so much money at the Federal level.
The Federal government has to cut the budget. Not simply fail to increase the payouts for every comer, but to actually cut each agency’s budget and stop spending. And the cuts have to be steep. During the Reagan years, the Citizens Against Government Waster (CAGW), which still exists, was taxed with looking at the budget and recommending cuts. That is where we need to go to get recommendations. And they will hurt. Probably at least ¼ of the government employees need to be laid off as their agencies are closed down or their mission reduced.
Can it Be Done?
Yes, it can. Javier Millei of Argentina cut his budget by 1% of the GDP of that country and the results were notable. One percent of our GDP is $257BB which is 4.45% of the federal budget. Of course, it seems to be an impossible task. How would these wealthy politicians ever get elected if they have to do the hard stuff? And yet, smart people do this every day, from CEOs of companies to all of us with our household budgets. We tighten our belts, give up things we like, stop buying things and shop for sales.
Tucker suggests that the fairest and fastest way to do this is to impose an across-the-board cut in all agencies and programs with the rule being that they cannot take the cuts out of transfer payments to individuals. There might be a few carve-outs, such as Border Patrol to address our serious problems there. But at the border, money isn’t the real problem. It’s how it’s being spent. How much money is being spent on goods and services to illegals?
Who Has the Mettle to Do This?
Of all the politicians claiming to want to run this country, only Donald Trump has actually had to run a business and make it work. Does he have the courage? We would probably be in a recession for two years, but it is something we’ve seen before. The impact on our standing in the world would be critical; we need to get this right. And it might be just the thing we need to crash Xi’s dreams of becoming the economic world leader. Wouldn’t that be a good idea?
If nothing is done soon, it may be too late. And that should scare everyone, regardless of their politics. The well has run dry. Ready to die of thirst?
