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June 13, 2011

Cap the Debt: How Congress Can Learn From Truman

Quote of the Day: “History clearly shows the government that stimulates the best, taxes, spends, and intrudes the least. In particular, the lesson from 1945-47 is that a sharp reduction in government spending frees up assets for productive use and leads to renewed growth.” – Economists Jason E. Taylor and Richard K. Vedder

On May 31, the House rejected President Obama’s request to raise the debt limit with no spending cuts. In addition to every Republican, 46% of Democrats opposed this bill.

* This demonstrates the power of polls, which shows even a substantial percentage of Democrats oppose raising the debt ceiling       
* But it also demonstrate the power of your RELENTLESS PRESSURE on Congress

More and more Democrats realize the U.S. is on an unsustainable path and that reforms must be implemented NOW instead of putting them off any longer.

The vote was good news, but this is only the beginning of the fight. WE ARE HOLDING THE LINE . . . 

NO increase on the debt ceiling.

Unless you tell your Representative and Senators where you stand, they may be tempted to cut a deal which will raise the debt limit while making only symbolic and marginal spending cuts.

Both Democrats and Republicans need to learn from history, particularly the Democratic Truman Administration. That’s why I sent this letter to Congress, from which you may borrow or copy . . .

I understand the concern you have about making the drastic spending cuts necessary to balance the budget and maintain the current debt ceiling.

However, the last time the national debt was this high relative to Gross Domestic Product (GDP) was at the end of World War II.

Economists Jason E. Taylor and Richard K. Vedder tell us what a Democratic-controlled White House and Congress did to the budget after World War II. They . . . .(http://www.cato.org/pubs/policy_report/v32n3/cpr32n3-1.html)

* slashed spending by more than 50% in one year
* removed ten million servicemen and one million civilian employees from the federal payroll
* lifted wartime economic controls, AS WELL AS many New Deal era regulations

Instead of a new Depression, the opposite occurred . . .

* The economy grew by 10% in two years
* Unemployment was under 4.5% in the first three postwar years
* By 1947, budget surpluses reached 6% of GDP, and the U.S. started paying down the debt

This isn’t surprising. It makes economic sense . . .

* More money is available for capital investment and economic growth, when government spends, taxes, and borrows less.
* It is less expensive to hire new workers, when regulations are reduced.

Please do now, what Congress did then:

1. End the wars, cancel defense contracts, and bring the troops home.
2. Cut spending to balance the budget, AND lift regulations that strangle the economy.

Follow the 1946, Truman formula, and America will adapt quickly to a more free and more prosperous reality.

Cap the debt!

END LETTER

You can send your letter using DownsizeDC.org’s Educate the Powerful System.

And we invite you to our Cap the Debt Facebook page. “Like” it and tell your friends! http://www.facebook.com/CapTheDebt

Jim Babka
President
DownsizeDC.org, Inc.

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