Wednesday, February 9, 2011

Congress: Act or Fail

Let’s be clear about one thing. The phrase “reduce the deficit” is a nice way to say “raise the debt more slowly.” Many voters don’t understand the difference between the “debt” and the “deficit” and quite a few think they mean the same thing. It is in everyone’s best interests that people understand the meaning of the terms and why they are so important.

The federal debt is the accumulation of every budget deficit this nation has ever had minus the extremely rare budget surpluses. If we “reduce the deficit” it just means that we added less debt than we added the previous year. Does that really sound like a good thing?

The only way to reduce the federal debt is to have annual budget surpluses. We’re not even close to having a surplus and a surplus has not been proposed by anyone in a position to make it happen.

If annual budget surpluses were a kind of animal, then they would be on the endangered species list and believed extinct. Seeing a federal budget surplus would be like sighting a flock of Passenger Pigeons being chased by Saber-Toothed Tigers as Wooly Mammoths watched. To see a federal budget surplus with the Democrats controlling the US Senate and occupying the White House would be like sighting a flock of Passenger Pigeons wearing I-Pods being chased by unicycle-riding Saber-Toothed Tigers as Wooly Mammoths watched while doing the Hula.

In normal situations, to produce a budget surplus, the federal government must do some combination of three things: increase its income, decrease its spending or sell its assets. In this instance, there is another thing that can and must be done first: we must reduce the risk to American businesses from government.

There is always risk in conducting business, and there will always be risk. Risk can be mitigated, to a degree, depending upon the amount of control the business has over the threat. A farmer can’t control the weather, but he can invest in an irrigation system and buy insurance in case of natural disasters.

What a farmer, or other businessman, cannot do is control a rogue federal government that stubbornly refuses to understand the reality of commerce. President Obama says he wants business growth but his actions are anti-growth. Of course business is concerned and reluctant to spend money in a bad economy with a clueless administration whose identity is wrapped in anti-business policies such as Cap and Trade, Obamacare, increased taxes and increased restrictions on energy production.

If the Obama Administration really wants to encourage business growth, which is a much more efficient way to increase revenues, then it would simply halt its actions that increase risks to business. That course of action would not only increase production, it would reduce costs to business and government.

Another threat to business is the looming federal debt and this is where we must rely on Congress. That debt, and the federal government’s failure to take it seriously, discourage investments. A reduction in spending would allow the private sector access to resources which it could use for productive means.

There are predictions of economic doom if the federal government reduces spending too quickly. It would make sense if economic shocks were to happen, and there is a strong argument that reducing entitlements too quickly would almost certainly be chaotic.

On the other hand, as we rack up more debt daily, we are reducing our available options to control our own future. I mentioned earlier that there are various combinations of things that can be done to begin reducing the debt. The final option is to default on our debt and every day that passes without actions to reduce spending and the debt we are a day closer to complete failure.

Taking bold action in the face of an oncoming crisis is risky. Failure to take bold action in the face of an oncoming crisis is not risky because the outcome is known; it is a guarantee of total failure.

Congress, the time has come: Act or Fail.

No comments:

Post a Comment

Blog Directory