Where the Deficit Came From (And How to Eliminate It)


American Thinker has an article that details where the budget deficit comes from. It’s a very objective look at the budget. Note that one of the bigger reasons for the deficit is not just the new spending we’ve committed to as a nation under the democratic congress, but the fact that Social Security is no longer the cash cow it once was.

Someone made the comment that if liberals want to go back to the tax policy of the 90’s, then we should also go back to the spending of the 90’s. I think this is a wonderful idea. If we lower our overall spending to the same level as the 90’s, I, and perhaps the vast majority of America, wouldn’t mind seeing our overall tax burden going up. The simple reason is that spending and borrowing is putting an enormous pressure on our economy. Spending controls how the economic resources are allocated, and it always means that they are allocated less efficiently, while borrowing limits the options in the market and distorts the time value of money unrealistically.

Overall, these things need to happen to improve our economy and increase tax revenues, ultimately to pay off the debt:

  1. Lower taxes, lower than the vast majority of nations out there to make America competitive for business
  2. Reduce spending to keep it below our tax revenues so that we can pay down the debt
  3. Eliminate regulations that harm industry, keeping only those which make economic transactions easier, such as weights, measures, and quality definitions
  4. Reform entitlement programs, either eliminating them or rewriting them so that they never become a burden on the country.
  5. End the welfare state, so that no person has an incentive to not participate in the economy productively.
  6. Dramatically and permanently reduce the number of people working for the government to the lowest levels possible.

If we do the above, we can pay off the debt in a generation. The economy will come roaring back to life, showing 10%, 20%, or even30% annual growth. America will become, once again, the center of the economic world, and all other nations will aspire to obtain a fraction of our success. As I’ve said before, I’d rather live in a country where we tax 1% on millions of trillions of dollars, than 50% on tens of trillions of dollars.

Of course, the easy way out is the way that would ruin the banking industry. (Frankly, what does the banking industry do for us than print the money Congress already has the power to print?) The way it works is simple. While raising the reserve ratio to 100%, congress prints money to make up the difference so that the amount of currency in the economy is stable. The money congress prints they can use to retire the national debt. By the time we raise the reserve ratio to 100%, the debt will be paid off, and Congress will be trying to invent ways to get the currency out into the market. If they choose wisely—such as improving our military, facilitating national and international trade, and then sending the rest to the states, we will benefit enormously, at the cost of the banking industry. As an added bonus, Congress can print money that matches the growth of the economy, ensuring that the dollar never grows in value but slowly, ever so slowly, diminishes in value so that we always have a very low inflation rate.

The best part is that Congress will be spending money they manufactured, not borrowed. At the end of the day, we can have an unlimited budget without any strings attached, provided the American economy continues to grow.


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