Monday, August 1, 2011

Let's Make a "Deal"

The Wall Street Journal declared victory with the debt deal upon which Congress agreed.  You would think that having spending cuts and not having an increase in taxes sounds like a win for those who advocate for smaller government.  And I'm happy that taxes didn't go up, especially since as recent as last Monday, Obama was calling for tax increases.  However, when you a closer look at what Congress came up with, it's not all that great.

First, the initial step consists of cutting $900 billion over ten years, which would be an average of $90 billion a year.  $90 billion is less than what America borrows in a month!  Second, there is a second phase of the deal in which a super-committee will be created in hopes to cut back on the deficit by $1.2-1.7 trillion.  Not only is this second phase is very vague and theoretical, but even if it does pass, the spending cuts wouldn't even take into effect until 2013.  Even if all of the proposals go through, the debt will go up to $20 trillion by 2020.

Why is the debt "deal" so ineffective?  Because it does not get at the root problem of out-of-control government spending.  Defense spending is about 20% of the United States federal budget.  When talking about making cuts to government spending, conservatives are pretty good about it, except when it comes to defense spending.  If we are to be serious about government spending, the Department of Defense should not be immune, especially if the threats are only perceived and not actual.

Although 20% of nearly $3.5T is no small number, if we are serious about cutting government spending, we really, really need to focus on entitlement spending.  When looking at Social Security (20%), Medicare and Medicaid (21%), and other welfare spending (14%), we are talking a grand total of 55% of government spending.

Between defense spending and entitlement spending, we are talking about three quarters of the budget.  If we are sincere about avoiding the exacerbation of the budget issue, we unquestionably need to focus on spending cuts.  We cannot be spending money we do not have.  Although debt is not inherently a bad thing, when we are not making any discernible effort to pay back on the debt, then we are going to be six feet under before we know it.  That is why ideas such as deleveraging or a Balanced Budget Amendment are good ones.  They take the problem by the horns rather than sweeping it under the rug.

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