According to the Treasury Department, “through the first nine months of the budget year, the federal deficit totaled $904.2 billion.” By the end of the fiscal year, which ends September 30, the Congressional Budget Office projects the deficit will total about $1.17 trillion. This is madness.
Please recall, before 2009, the federal government never ran a deficit above $500 billion. Most years it was far less. In fact, just 12 years ago the government managed to pull in a surplus…though they didn’t use their excess proceeds to pay down the national debt.
But since 2009, $1 trillion deficits have been recurrent. Apparently, that’s what it takes to sustain the nation; to keep the government running and to dole out all the goodies promised to the populace. Any reduction in spending and increase in taxes, we’re told, will wreck the economy…
Deficit Spending and Reduction
The Keynesians, led by Paul Krugman, point to Greece as an example of what happens when you raise taxes and cut spending. Suddenly, without all the credit boosting things up, the economy shrinks. Then, as the economy shrinks, tax receipts fall – resulting in not a decrease in the deficit, but an increase.
Perhaps Krugman is right, in the short term. Nonetheless, the way you ultimately reduce the deficit is to reduce spending. Without all the stimulus distorting and disfiguring the economy, growth will eventually return and deficits will come down.
The experience over the last four years has shown that massive deficit spending is a very inefficient way to grow an economy. What’s resulted is an economy with its peddle pressed firmly to the metal while stuck in first gear. Everything’s running red hot, but it’s hardly going anywhere. Clearly, continuing on this current course will end in a full meltdown.
Wouldn’t it be better to let things cool down, painful as it may initially be, so a new course to sustained prosperity can be established?
Here at the Economic Prism, we prefer small government. Likewise, we prefer spending cuts to tax increases. But what to cut?
In the spirit of benevolent mischief, and because no one in Washington bothered to ask us, we’ll offer some suggestions…
Why Chimpanzees Throw Poop at Zoo Gawkers
For starters, we’d prohibit using taxpayer dollars to fund research aimed at determining why chimpanzees throw their poop at gawking zoo visitors. According to the results of the $592,527 study funded by the National Institute of Health in 2011, “chimps that excelled at throwing feces and other objects had better communication skills than chimps with less-refined skills.” Good to know, for sure.
After that we’d cut back on the $765,828 that went to subsidize pancakes in Washington. While at it, we’d put the kibosh on the $35.38 million of taxpayer dollars used for Congresses summertime parties. So, too, we’d eliminate the $30 million for mango farmers in Pakistan, we’d stop paying $120 million in benefits checks to dead federal employees, we’d cut $14 million for Air Force Green Energy, and $15.3 million for the infamous Alaska super-bridge to nowhere…plus much, much more.
In all seriousness, there’s no honest way the federal debt – nearly $15.9 trillion and counting – can ever be repaid. Unfortunately, we’re heading toward either default or hyperinflation. Given that 61 percent of all government debt issued by the U.S. Treasury Department in 2011 was purchased by the Federal Reserve with money created from nothing, we believe hyperinflation will ultimately win out.
Throughout all of history, the best antidote for protecting wealth from the ravages of hyperinflation has been gold and silver. It was during the time of the Romans and it is still true today. Owning gold and silver coins is the ultimate protection against the ultimate financial crisis.
Gold and silver coins are independent of governments and international boarders, they can not be inflated or created out of thin air, and have a long and proven track record of preserving value over time. They will be the money of last resort following the approaching hyperinflationary blowout and complete system breakdown.
for Economic Prism