THE BURGEONING NATIONAL DEBT-61

Given the burgeoning national debt which has now technically exceeded the $14.3 trillion debt limit mandated by congress I would like to ask the reader (1.) if you believe this country is on an unsustainable trajectory where the Obama administration projects the National Debt will be just under $21 trillion by 2016 if there are no changes in government policies and (2.) if the first answer is yes, then what should be done.

A few background data follow:

By mid 2011 the National Debt (ND) is now $14 ½ trillion and the Gross Domestic Product (GDP) is $14.7 trillion. By comparison the ND in 1946, at the end of WWII, was $269 billion ($3 trillion in inflation adjusted 2011 dollars) with a GDP of $222 billion ($2.5 trillion). In 1970, the first time the GDP reached a $ trillion, the figures were ND $371 billion ($2.1 trillion) and GDP $1.04 trillion ($5.8 trillion). In 2000 these figures were ND $5.7 trillion ($7.1 trillion) and GDP $9.8 trillion ($12.3 trillion).

Therefore for the first time since the understandably large spending by the federal government during WWII (after all the country was in a fight for survival) the ND will soon overtake the county’s GDP. Everyone, politician and layman alike, agrees that these large national deficits cannot continue to be piled up with the possible exception of hard left politicos such as Harry Reid, Nancy Pelosi, and other liberal loons in and out of congress. President Obama says he recognizes that the country cannot continue with these huge deficits, yet his actions, so far, belie his words. As I stated, the current National Debt is about $14 ½ trillion with the federal government currently running up a $4 ½ billion per day ($1.64 trillion per year) increase in the debt. Fortunately there is a brewing revolt of sensible Democrats in both the House and Senate, and not just the ones up for reelection in 2012, who are opting for meaningful federal budget cuts along with the Republicans.

How did this country get into this frightful financial mess? There is bipartisan blame and it will take a bipartisan solution to correct the problem. The George W. Bush administration increased the nation’s debt from approximately $5 ½ trillion to $10 ½ trillion in eight years. The two wars, Iraq and Afghanistan, the prescription drug program, and the No Child Left Behind initiative, all unfunded, were major causes. This damn “Nation building” effort under taken by Bush in Iraq and Afghanistan was a naïve policy destine to fail as any knowledgeable student of history could have surmised. I do not impugn the motives of President Bush. I believe the evidence shows that he was sincere and honorable in his actions. His intentions were good, but everyone knows what the road to hell is paved with.

How about the policies of President Obama where an approximate additional $4 trillion of debt has been run up in just 2 ½ years of his administration? His then chief-of-staff, Rahm Emanuel, infamously said “You never want a serious crisis to go to waste.” so after the colossal waste of the almost $1 trillion government stimulus package the next major item on the Obama and Democrat leadership in congress agenda was the health care overhaul representing 1/6 of the American economy. With no bipartisan support this increasingly unpopular legislation was rammed through congress. A sensible approach would have been to concentrate on improving the American economy and lowering unemployment.

What policies do I advocate? The following are a good start: Concentrate on lowering government spending in a major way rather than raising federal taxes (more on that later). It is axiomatic that most government spending tends to crowd out private spending thereby, on balance, increasing, not decreasing unemployment. Big Government advocates will never admit this fact even with the prime example of the greatly expanded federal government spending during the Great Depression of the 1930’s (first by President Hoover, then even more so by President Roosevelt) that contributed to the most protracted and severe economic downturn in American history.

Where the federal government can make positive contributions towards encouraging a robust economy is by not trying to overregulate private enterprise and by not imposing onerous individual and business taxes.

What am I referring to in particular? In West Texas there is an attempt by the EPA to curtail the exploration and production of oil & natural gas in order to save the habitat of one particular lizard that most people in that area have never even seen. The corporate tax rate is currently 35% in the United States. This is the highest rate in the industrialized world. There are myriad examples of these types of anti-business policies by congress and federal agencies. These noxious practices did not originate with the Obama administration or when Democrats gained control of congress, but they have been grossly expanded since 2008. In order to create a healthier economy the opposite should have occurred.

There is another positive aspect to downsizing government. There is and always has been waste, fraud, duplication, and inefficiencies in government; much more so than in the private sector of the economy where there is a self-correcting mechanism such that companies that are badly run or do not adapt to a changing business climate tend to go bankrupt. No such force exists with government agencies that always seem to grow like “Topsy” whether they are efficient or needed. Even given that waste, fraud, duplication, and inefficiencies are not palliated, these problems should, seemingly apodictically, be automatically reduced with significant shrinkage of government.

Apart from these decreases in government spending there should be $billions in savings for the government from better policing of their ubiquitous spending programs. For example, Medicare expenditures in 2010 were $528 billion with the Reuters News Agency estimating that $200 billion was due to fraud; the CBS “60 Minutes” TV program put this figure at $60 billion. New York State leads the nation in Medicaid expenditures with $44.5 billion spent in 2005 of which 40% or $18 billion was attributed to fraud or waste.

How about raising taxes to help lower the national debt? I previously suggested that our too high corporate tax rate has resulted in job loses by encouraging companies to transfer to other countries. The individual income tax rate is already heavily tilted towards upper income families such that, according to the latest data from the IRS, 51% of the lowest income families pay no federal income taxes. In fact, many of these families are paid by the federal and state governments (read tax payers) in the forms of the Income Tax Credit, food stamps (one in 7 families in the USA are currently receiving them), subsidies to dependent mothers, and other welfare programs. It is an unhealthy situation when half the population does not contribute to this major part of the financial maintenance of their country. There seems no better way to create a dependent and entitlement segment of the population with their temptation to encourage or at least not object to taxes being raised on everyone else. These people may fall into the trap of believing they would not be affected because they would still not pay taxes, but they would be affected in lost job opportunities.

Will congress and the president finally address this colossal national debt problem before the country fall into a second rate or worst financial and social status? The battle has been joined, but a definitive outcome will not be decided before the 2012 presidential and congressional elections by the voters of this still great country.