- The Washington Times - Thursday, March 25, 2010


America’s fiscal problem has many manifestations but just one cause: spending. If you

believe that, you are a fiscal conservative. If you don’t, you’re wrong. And if you believe that all America needs to do to fix the problem is raise taxes, read on.

However you examine America’s fiscal history, from New Deal to foreseeable future, you find federal spending outracing all else. As the table shows, neither revenues nor economy can keep pace with it.

Because of federal spending’s unremitting growth, the only way to understand it is as a percentage of gross domestic product (GDP). Only by consistently comparing it to the economy can you see its full effect. Its growth - both past and projected - shows a rapid rise not just overall but relative to the economy as well.

Government spending’s explosion started first to fight the Depression and then World War II. The problem is, it never ended - even when its original justifications did. In the postwar 1940s, federal spending was more than 50 percent greater, relative to the economy, than it had been during Franklin D. Roosevelt’s first year in office. By the time the Great Society’s entitlement programs began to accelerate it, spending rose another 25 percent as compared to the economy.

Today’s recession-fueled federal spending has grown another 44 percent beyond that of the Great Society. According to the Congressional Budget Office, long-term estimates (CBO’s moreconservative set of assumptions) show spending’s continuing escalation as baby-boomer-boosted entitlement programs swell.

During this fiscal onslaught, revenues have been far from dormant. Their trend, too, is one of steady progression - again, collecting an increasing share relative to the U.S. economy. Yet they are hopelessly overmatched. In fact, even applying the highest percentage of federal taxes ever collected from the economy in U.S. history (20.9 percent of GDP in 1944) would not cover any of the present or projected levels of federal spending.

From an economic standpoint, it is not surprising that outlays outstrip revenues. While means are always limited, wants are always unlimited. Once government thrusts itself into the want-fulfilling business, its course is preordained.

Having established the fact and cause of government spending’s spiral, the question is: Why is this bad? The answer is fourfold.

First is its effect on our governing foundation. With infinite foresight, our forefathers constructed a very limited government document in the Constitution. They saw government as a necessary means that had to be tolerated but also tightly controlled. Its articles strictly define its purview, and the Bill of Rights caps it with a Ten Commandments of “thou shalt nots.”

Increased spending means increased government. The entity our Founders sought to constrain with laws we now expand with uncontrolled spending. One thing is certain: When the economy and laws conflict, bet on the economy. The only laws that governments have proved consistently unable to rewrite are the laws of economics.

Second is its economic effect. When government spending increases, the resources come from somewhere. That somewhere is the private sector. The private sector is not only more productive than the public sector, but productive of real wealth. Increasing federal spending faster than the economy can grow means having an economy that is increasingly falling behind its potential. That in turn means a decrease in society’s overall wealth from what it otherwise would have been.

Third is the effect of federal spending’s expansion. Federal spending tends to perpetuate itself. The more government gets, the more it wants and the better equipped it becomes to get it. Because government is not internally ordered by economic laws of competition, there is no brake on its demands. Going from small government to big government was hard; it took roughly 1 1/2 centuries. Going from big to enormous was inevitable - taking just three decades.

Fourth is its effective transformation of citizens into clients. As government does more, people expect more. Our relationship with it changes. A nation that sprang from the Declaration of Independence tacitly ratifies an Admission of Dependence. Already, the bottom half of the nation’s tax filers pay a negative 1.1 percent of the nation’s income taxes, while just more than a quarter of the nation’s top tax filers pay almost 92 percent of its income taxes.

As federal spending continues uncontrolled, the stakes go well beyond the economy. We threaten to go from a governing template in which citizens rigorously control their government to the reverse. Just as there are many manifestations of the spending problem but only one cause, there is also but one solution: Stop.

J.T. Young served in the Treasury Department and the Office of Management and Budget from 2001 to 2004 and is now a registered lobbyist.



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