Cut Government Spending – No Tax Increases

Democracy and Power 104: Future Debt Burden

A government debt is a government claim against personal income and private property – an unpaid tax bill. —Hans F. Sennholz

Cut Government Spending – No Tax Increases

I have three amazing grandchildren ages 7, 6 and 3.  In the next few months, enormous political decisions will be made, which will greatly impact their lives.  Does America substantially reduce government spending?  Or does government continue its excessive spending and increasing our debt?  I think about my grandchildren, and worry about what the future holds for them.

Milton Friedman wisely warned us that spending is ultimately a debilitating tax.  [Read:  Stop Excessive Government Spending – NOW!]

Keep your eye on one thing and one thing only: how much government is spending, because that’s the true tax … If you’re not paying for it in the form of explicit taxes, you’re paying for it indirectly in the form of inflation or in the form of borrowing. The thing you should keep your eye on is what government spends, and the real problem is to hold down government spending as a fraction of our income, and if you do that, you can stop worrying about the debt.


Immorally, the enormous spending committed by Bush II and Obama as well as our expanding debt will be paid by future workers.  My grandchildren and all other working Americans will owe this debt.  Wrongfully, their personal freedom and standard of living will suffer and decline because of the debt we’re causing today.

Presently, President Obama and Representative Paul Ryan have opposing agendas on spending.  

Obama and the Democrats are calling for “a balanced approach,” which includes raising taxes and making some spending cuts; approximately fifty-fifty.  Of course, this is in addition to the increased taxes on the rich and our Social Security tax, which was raised another 2% in the fiscal cliff deal. 

The 2% increase on Social Security will allow government spending to increase by at least $1.4 trillion over the next 10 years.  Amazing!  That’s $1.4 trillion that could be spent or invested by American workers as they deemed important.  (By the way, this is how a  free society prospers.  Everyone puts in their time, intellect and resources to their best use – benefiting the individual and society, and everyone benefits.   We left taxation in England for a reason.)

Opposite of our president, Representative Ryan has a plan to balance the budget in 10 years without raising taxes.  For my grandchildren and every future American worker, Ryan must prevail.

Robert Barro, an economist at Harvard, strongly advocates cutting spending and reducing the debt.  Barro cites Harvard research, which verifies cutting government spending, as far superior for the economy than tax increases. 

As the economist Alberto Alesina has found from studies of fiscal stabilization in OECD countries, eliminating fiscal deficits through spending cuts tends to be much better for the economy than eliminating them through tax increases.

Barro explains that a smaller government means more investments and growth by Americans making spending and investment decisions.
A natural interpretation is that spending adjustments work better because they promise smaller government, thereby favoring economic growth.

Of course, my grandchildren have no knowledge of the excellent research and America’s acute political controversy.  Sadly, most adult Americans have a very limited understanding of how today’s government spending wrecks future generations. 

Tragically, this is the great nemesis of most, democratically elected governments in the United States and Europe.  Harmfully, politicians please present voters and inflict debt and decline on future generations.  
Without a doubt, Obama and other Democrats will claim government spending is necessary to prevent a recession.  This has been their averment for four years, which has been devastatingly wrong.  Again Barro, knowing the excellent academic research, strongly advocates for cutting the size of government.  

Another recession in the US would be no great surprise. If it does happen, it can certainly be attributed to an array of bad government policies and other forces and not to cutting the size of government.   Indeed, it is nonsense to think cuts in government spending should be avoided in the “short run” to lower the chance of a recession.   If a smaller government is a good idea in the long run (as I believe it is), it is also a good idea in the short run.
Canada, Sweden, Switzerland, Poland, and to some extent Germany have emphasized reducing the size of government.  Currently, all these countries are out performing the United States.

Now, is the time for America to reduce the size of the federal government.