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All Da King's Men

Economic Lunacy

By Da King Published: December 23, 2010

"Government big enough to supply everything you need is big enough to take everything you have...The course of history shows that as a government grows, liberty decreases." - Thomas Jefferson

When President Obama agreed to extend the Bush tax cuts by two years, left-wingers were very irate that taxes weren't going up (what kind of people want taxes to go UP, anyway ?). Sen. Bernie Sanders of the United Soviet Socialist Republic of Vermont spoke in opposition to the Bush tax cuts for eight and a half hours on the Senate floor. Here's the gist of the feelings of both Sanders and liberals in general:

Sen. SANDERS: The folks, the Democrats in the House, are putting up a fight. And I think what they are saying very loudly and clearly is what I believe - is that it is basically absurd to be giving huge tax breaks to the richest people in this country, including many millionaires and billionaires at the same time as we have a record-breaking deficit of $13.7 trillion national debt, at the same time as we are ignoring many enormous problems facing our country, including a crumbling infrastructure, an educational system which needs a lot of support, and the fact that we have the highest rate of childhood poverty of any major country on Earth.

According to Sen. Sanders, the problems with this country are...we aren't taxed enough, and the government isn't spending enough. Those are his alleged reasons why we have huge deficits and debt, along with crumbling infrastructure, a lousy educational system, high childhood poverty, etc. If only we could tax and spend more, as the liberals and socialists desire, we could surely solve these problems, correct ???

Well, it occurs to me that we HAVE taxed and spent quite extensively to solve these problems over the years. We have many programs in place to combat childhood poverty, and we spend more money on education than any other country in the world. Unlike Sanders, I believe government taxing and spending has become so profuse that it has actually become a large part of the problem. Let's look at some historical numbers to see who is correct, Sen. Sanders or myself:

First, let's look at taxation (government revenue). Sen. Sanders thinks taxes are too low. Here is a chart depicting overall government revenue compared to GDP (the entire economy) over the years:

As you can see, taxes are anything but low. They have gone up, up, up over the years, taking an ever larger bite out of every citizen's wages and driving up the prices of every product the citizens purchase. In 2007, prior to the revenue killing recession, taxes were consuming 37.2% of the entire American economy. If that isn't more than enough to fix our infrastructure, have a good educational system, and eliminate childhood poverty, then something is seriously amiss.

Sen. Sanders thinks government spending is too low, but the truth is, even though taxes have increased enormously over the years, they weren't enough to keep up with profligate government spending. To say the government has been spending like drunken sailors is an insult to drunken sailors. The next chart shows how overall government spending has skyrocketed:

In 2010, government spending is consuming an incredible 45.65% of our entire economy, yet the government STILL can't deal with infrastructure, education, and childhood poverty ? Give me a break already. The taxpayers are being played for fools. You will notice the two spikes in government spending in 1917 and 1941. Those were spending levels during WWI and WW2, respectively. We were dedicating our entire economies to fighting those world war efforts then. Now, we are approaching WWII spending levels even though there is no World War taking place. That is simply astounding to me.

You will notice a slight dip in government spending relative to GDP in the 1990's. That's when President Clinton and his Republican Congress worked together to slow the rate of increase in government spending. That led to some balanced budgets at the end of the 90's, and also gives us a strong clue as to how to fix our current problems. Hint - We do the OPPOSITE of what Sen. Sanders proposes. We cut spending.

It is readily apparent from these two charts that government revenue is not the problem. The taxpayers already contribute more than enough for the government to perform it's functions. Taxes have never been higher. The problem is government spending. No matter how much the taxpayers contribute to our government, it is NEVER enough, and the problems NEVER get solved. Sen. Sanders wants us to believe reversing the Bush tax cuts for the rich will attenuate the problem. With all due respect to Sanders, that is insane. We have a current deficit of $1.34 trillion for 2010. The Bush tax cuts for the rich would only address $70 billion of that each year over the next 10 years. That $70 billion is about 5% of the 2010 deficit. Reversing those Bush tax cuts won't accomplish much of anything. It's a drop in the bucket. $70 billion is less than the amount of new spending President Obama signed into law in the last week. Since Obama has been President, we have accumulated well over $3.5 trillion in new debt in less than two years, and federal spending has increased by about $800 billion per year over 2008 levels, yet we're supposed to believe $70 billion from the Bush tax cuts is the problem ? What an insult to the collective intelligence of the people. I don't know how politicians say these things with a straight face, much less how some people are gullible enough to believe them.

In spite of the highest overall tax rates ever, our government institutions are broke at every level. The federal government is nearly $13.9 trillion in debt. Our states are another $1.15 trillion in debt. Our local governments are another $1.695 trillion in debt. We have paid $3.29 trillion in interest on all this debt.

As depressing as this all is, the real truth is even worse. The only reason our economic picture looks as "bright" as it does is due to an accounting trick. Our government does it's accounting using the cash accounting method. If the government used an accrual method of accounting, the picture becomes a lot bleaker. The truth is, we have accumulated $2 trillion in new government liabilities in 2010 alone, according to new Treasury reports. In reality, our deficit is a whole lot more than the $1.34 trillion reported, because we have accruals in the form of unfunded liabilities and interest on the debt that should be included. Those are growing at between $1-2 trillion every year.

In summary, suggesting we tax more and spend more, as Sen. Sanders and liberals would have us do, is sheer economic lunacy. Those recommending such a course should be confined to mental institutions. Their recommendations equate to pouring water on a drowning man. Maybe we don't have the perfect socialist utopia Sen. Sanders envisions, but bankrupting the coutry is no solution, and bankruptcy is the path we're headed down. We currently have over $55 trillion in unfunded government liabilities in the future. That's what we've accrued. Next, we'll have ObamaCare spending and taxation kicking in to drive taxes and spending even higher. If we keep heading down this same path, eventually every single citizen in the United States will be destitute, as the government sucks an ever larger portion of everyone's wages away to pay for itself. As Jefferson said, a "government big enough to supply everything you need is big enough to take away everything you have." That is not only what may happen if we continue along this path, that is what WILL happen if the spendathon continues. That is what will have to happen. Nothing is free. Maybe that's what Sen. Sanders wants, but it sure as hell wasn't what Thomas Jefferson wanted, and it sure as hell isn't what I want. If I wanted to live in Cuba, I'd move there. There's a real good reason why nobody does that. There's a real good reason why everyone immigrates to America instead. It's called liberty (what's left of it), and Bernie Sanders doesn't know a damn thing about it.

P.S. - The economic facts presented here are not liberal, conservative, or centrist. The facts are not ideological. They are merely the facts.



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