July 30, 2008
Deficit Control
By Jim Babka
Quote of the Day:
"Be thankful we're not getting all the government we're paying for."
-- Will Rogers

Subject: Can we control the runaway federal deficit?

When you earn less, you must spend less. But when the government earns less, it spends more, usually by borrowing. It's happening right now.

The U.S. economy has slowed. Tax revenues are dropping, but government spending is soaring. The federal deficit is projected to reach a record level next year -- $490 billion. That's nearly half a trillion dollars added to the national debt in just one year.

This is bad for the economy. Money that's borrowed by the government can't be borrowed by businesses. Businesses create jobs. Businesses are competing with the government for capital. It's a competition businesses can't win. But it gets worse . . .

The government spends what it borrows less efficiently than businesses would. This means that government borrowing makes the economy smaller than it could otherwise be. Government borrowing makes us poorer. But it gets worse . . .

The more the government borrows the more it must pay in interest. The larger the debt grows, the more your taxes are consumed by interest payments. It's a vicious cycle with vicious results.

Sadly, the personal cost you pay for government borrowing is largely invisible. On top of that, you can't see what you're not getting from business innovation. That's why politicians would rather borrow than tax. 

It's important to understand that very few politicians want to raise taxes. Even Barack Obama proposes tax cuts for the middle class in order to justify his proposed tax increase on Americans who earn more than $200,000 a year.

The fact is that it's much easier to stop a tax increase than it is to stop government borrowing. That's probably why a man like Congressman Ron Paul is a co-sponsor of H.R. 500, which would cut Congressional pay when the federal government runs a deficit.

Some DC Downsizers reasonably object that Congress would simply avoid deficits, and the resulting pay cuts, by raising taxes. This is possible, but does it really matter? Is it really better to pay for government by borrowing than by taxing? Why not carry that idea to its logical conclusion, cut all taxes in half, and make up the difference with more borrowing?

Does it really make sense to push today's costs onto future generations?

We don't think so. We think it makes more sense, both morally and practically, to eliminate "borrow and spend" first, and then reduce "tax and spend" over time. We also think it would be nearly impossible for Congress to pass a tax increase in order to avoid suffering a pay cut.

For one thing, we think this would be one of the few instances when Congressional Republicans would be able to muster enough integrity to defend their supposed principles. We think the Republicans would be able to block such tax increases, especially in the Senate.

At the very least, H.R. 500 would put the politicians on the spot. It would force them to make hard choices, instead of just constantly expanding the government without suffering any personal consequences.

You will find a list of the current sponsors of H.R. 500 below my signature. If one or more of your elected representatives is on the list, please send a message thanking them. If one or more of your elected representatives is not on the list, please ask them to become co-sponsors. You can send your message here.

Finally, we are near the deadline for our monthly fundraising drive. We need to raise an additional $1,228 by the end of the day tomorrow. You can help by making a contribution here.

Thank you for being a part of the growing Downsize DC army.

Jim Babka
President, Inc.

Here's the list of H.R. 500 co-sponsors . . .

Rep Barrett, J. Gresham [SC-3] - 4/19/2007
Rep Bartlett, Roscoe G. [MD-6] - 1/16/2007
Rep Bilbray, Brian P. [CA-50] - 7/10/2007
Rep Emerson, Jo Ann [MO-8] - 7/10/2007
Rep English, Phil [PA-3] - 2/6/2007
Rep Flake, Jeff [AZ-6] - 2/6/2007
Rep Gingrey, Phil [GA-11] - 1/16/2007
Rep Goode, Virgil H., Jr. [VA-5] - 3/20/2007
Rep Miller, Jeff [FL-1] - 2/6/2007
Rep Norwood, Charles W. [GA-10] - 1/16/2007
Rep Paul, Ron [TX-14] - 1/16/2007
Rep Radanovich, George [CA-19] - 7/18/2007
Rep Westmoreland, Lynn A. [GA-3] - 2/8/2007
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