Debt and Deficits

How to Balance the Budget in One Easy Step

It's like a real life easy button no one who can wants to use.

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A few weeks ago in this space I wrote about Rep. Dave Brat (R-Va.) sounding the alarm on federal spending. Like many others, Brat points out that in only a decade or so, only four programs, Medicare, Medicaid, Social Security, and interest on the national debt—will devour every single dollar Washington collects in taxes. Everything else, from education to national defense, will be funded by further borrowing.

Reports from the Congressional Budget Office show that while the annual deficit has shrunk recently, it will soon inflate to more than $1 trillion a year, and stay there. America's debt is now bigger than America's economy, and still growing. Interest on the debt is now the fastest-growing part of the federal budget. This is a recipe for Greece-like disaster.

Admitting you have a problem is the first step to recovery. But it doesn't do much good if you stop there. Some readers wanted to hear less about the problem, which has been well-known for many a year, and more about possible solutions. How do we avoid the iceberg up ahead?

There are several possible ways. Many Americans have long favored a balanced-budget amendment, and by Ronald Reagan's first term a resolution to convene a constitutional convention for that purpose was just a few states shy of sufficient ratification. Then the momentum died.

The idea has two obvious shortcomings. First, it can tie Washington's hands at a moment when deficit spending is urgently needed, e.g., during a war for national survival. Second, it can become a vehicle for raising taxes rather than constraining spending.

Then there's sequestration. Like it or not, sequestration has helped slow the growth of the federal government. Before it took effect, federal spending was on track to consume one-fourth of America's GDP. By last year, Washington sopped up only one-fifth of America's wealth.

Unfortunately, sequestration is a meat-ax. Half of its spending cuts come from defense, which is the federal government's first and most important duty. That might have been politically necessary, but it warps national priorities. Fifty years ago defense accounted for 7.2 percent of GDP; now it's 3.5 percent. Mandatory social-welfare spending, meanwhile, has grown from 5.7 percent of GDP to 14.3 percent during the same period.

But there's a third option that could put America in the black and reduce the national debt without raising taxes, hog-tying Congress in an emergency, imposing painful spending cuts, or short-circuiting rational policy with Procrustean brutality. It's even comparatively simple… simple enough, in fact, to be summed up in a single sentence.

Ready?

Hold the growth of government spending to 2 percent per year.

That's it. If Washington did only that, the federal budget would be balanced within six years.

Hold the growth of government spending to just 3 percent per year, and balancing the budget would take slightly longer: nine years.

Two or 3 percent growth a year is fairly rapid, but by historical terms it is also quite modest. During the past two decades, federal spending grew 63 percent faster than inflation; mandatory social spending doubled, even after adjusting for inflation. But as the Cato Institute's Daniel J. Mitchell points out, many other advanced democracies have held their spending in similar check. Sweden, Canada, the Netherlands, and Italy did so during the 1990s; Germany, Switzerland, Israel and Taiwan did so in the 2000s. And because their economies grew somewhat faster, their government debt burdens shrank.

Mitchell advocates the "Swiss debt brake." In 2003, a voter-approved initiative took effect that required Switzerland to raise spending no faster than revenue grew. Before it took effect, Mitchell notes, Swiss government spending grew at an average annual rate of 4.3 percent. Since then, it has increased by an average annual rate of 2.6 percent. The actual rate of growth is tied to the growth in government revenue. Because that fluctuates depending on economic conditions, the government uses an average for a multi-year period.

And it works: While other European nations' government debt was growing, Swiss debt shrank. But unlike a balanced-budget amendment, the debt brake does not preclude deficit spending. Nor does it create an incentive to raise taxes. What it does do, generally speaking, is allow the economy to grow faster than the government, rather than vice versa.

Granted, the idea also has downsides. It does little to address wasteful spending, except to the limited extent that it requires a modest degree of fiscal discipline. If Congress wants to lavish hundreds of billions of dollars on a new weapons platform of dubious worth to please defense-industry lobbyists or create jobs building it in every congressional district, Congress can. If Congress wants to eliminate the Defense Department and reallocate all of its funding to a newly created Department of Rainbows, Unicorns and Butterflys, it can do that too.

But then, the proposal is not designed to usher in a golden age of wisdom. Its aim is much more modest: altering the fiscal trajectory of the federal government just enough to avoid the iceberg dead ahead. Given current trends, that alone would be a marvelous achievement.

This article originally appeared at the Richmond Times-Dispatch.

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  1. But then, the proposal is not designed to usher in a golden age of wisdom.

    In case of emergency, be less unwise.

    1. I was going to suggest euthanizing all the progressives, but we could try this too.

      1. “Hold the growth of government spending to 2 percent per year.”

        If this is the best insight the libertarians at Reason can provide, then no wonder there are no libertarians.

        Holding the growths of government spending to x percent does not work because:

        1) Every time there is a recession or crisis, an exception will be made to jump spending. That constantly resets the growth upwards

        2) Most of the government’s spending on entitlements is fixed and based on “need” not budgets. Social security, medicare, wellfare, obamacare, etc. will continue to increase spending BY LAW at the rates they’ve been promised. You could say “let’s mandate 2% reductions in spending each year” and entitlement programs would still grow.

        The ONLY way to reduce spending is when the dollar finally collapses taking the Federal Government’s source of funding along with it. Economy, tax rates nothing else matter because the government just prints what it needs. When the individuals finally walk away from the dollar, that will be the action that starves the Federal government of funds and force reduced spending.

        Nothing else will stop it at this point.

        1. So……we’re back to my suggestion. Once progressives are gone, things can finally change. And so we’re clear, I don’t care which party the pros are from. Put them all down.

          1. It won’t matter if someone is a program or not, anyone dependent on the government and not themselves will have a hard time if/when the money runs out

            1. Stupid autocorrect thinks prog = program…

              1. Except I believe pro’s was short for progress. You should have stayed with your original spelling. It was equally relevant.

                1. progressives. grrr.

            2. Being in the throes of a gritty smack battle is never easy. And it will get harder the longer we wait.

          2. There are a lot more people than just the progressives that are completely dependent on the scam of central planning.

            Many conservatives, especially those in the defense industry, are hyper-dependent on the “government picking winners and losers” strategy.

            Really, libertarians would have to euthanize just about everyone in the USA to get liberty here thanks to the pervasiveness of individual and group (that includes corporations, churches, and unions, among other groups) welfare.

            Luckily, they won’t have to actually perform the act of killing everyone off–the coming economic crash will wipe out most of the leeches since they are precisely the least self-sufficient. Sure, they will fight tooth and nail to have the gov’t steal from the taxpayers on their behalf, and they will succeed somewhat at this, but there will ultimately be no saving them.

      2. I endorse Suicidy’s plan

  2. Talk about naive. 🙂

    Hint: you cannot reason with/ or limit/ or change a 100% corrupt system funded purely via theft and/or fiscal forgery.

    All governments are necessarily 100% corrupt, as all rely on theft and forgery to finance their objectives.

    You cannot somehow reform/change it/them into something “good” with supposed limits on growth, be it 2% per annum, or whatever.

    Ain’t gonna happen- never has, never will.

    Dream on, or not? As always, your choice dear reader. 🙂

    “Dreams[ Hormegeddon Blues]”:
    http://www.youtube.com/watch?v=w0o-C1_LZzk

    Regards, onebornfree.
    Personal Freedom Consulting
    onebornfree.blogspot.com

    1. Fuck off, spammer.

    2. ‘Personal Freedom Consulting’? Who the fuck pays this faggoty douchebag for anything?

  3. A fiat currency scold should be along any moment now to point out that the fed can print as much money as it wants. Therefore, talking about scarcity with respect to the government is meaningless, or something, and the real threat is hyperinflation, or something.

    Of course, one might be worried about hyperinflation in a scenario in which all current income taxes are being piped directly into social welfare spending and debt interest, the government is borrowing everything it can to pay for everything else, including the military, the roadz, the FDA, etc., and if the fed is having to kick in and print money to help make all of that happen.

    But hey: fiat currency implies post scarcity, and you’re just an idiot for talking about dollar scarcities. Boom, bitches.

    1. Correct. Government spending is only limited by real resources.
      See my comments below (right at the bottom) detailing this 🙂

    2. http://heteconomist.com/exerci…..nstraints/
      Treasury operations in detail (and hypercolour :b )

  4. OT: A former US Pardon Attorney has proposed moving the Office of the Pardon Attorney from the DoJ to the Executive Office of the President, believing it could reverse the drop in Presidential pardons/commutations we’ve seen over the past few decades. http://www.slate.com/articles/….._less.html

    It personally never made sense to me that the DoJ had any power over the pardon process to begin with. The DoJ’s main mission is to prosecute crimes and to support the US Attorneys in their prosecution of crimes; recommending a pardon is essentially accusing a DoJ prosecutor or a US Attorney of making the wrong call.

    1. Putting the pardon office within DoJ makes no sense. If Justice believed someone should be pardoned, they could just decline to prosecute. The DoJ isn’t going to spend all of its time and resources securing a conviction only to turn around and pardon the guy.

    2. It has personally never made sense to me that the President has any power over the DOJ. What a fucking easy way to corrupt the system.

      1. You prefer that DOJ (the decision to prosecute and actual prosecution) be in the judiciary?

  5. Half of its spending cuts come from defense, which is the federal government’s first and most important duty.

    Is it? According to whom exactly?

    If we are going to go by the text of the Constitution, Article I Section 8’s first power is the power to lay taxes and its second is to borrow money; Section 8 doesn’t get around to the common defense until #11.

    The Constitution’s preamble states “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.” Again, defense is tucked into the middle.

    While defense is of course a key function of any national government, to say it is the “first and most important duty” is, uh, going a bit far in my mind. The Preamble has it right: justice is more important than defense. An unjust government which is competent at defense would be a terrible combination.

    1. And even if you feel that defense is the highest priority, why makes Hinkle think that the current level of spending is close to optimal? Perhaps cutting defense spending in half makes sense.

      1. Let’s take the premise at it’s face.

        1. form a more perfect union. OK. That’s a reason for the formation of the government, not really something to do.

        2. Establish justice. Right-O. Get a system of laws and a judiciary. Got it. Not a budget buster there.

        3. Insure domestic tranquility. Kinda goes with justice – need peacekeepers and a system of laws that will keep the peace. Still not a budget buster

        4. Provide for the common defense. Ok, now we have a system of laws and courts, we need a military. There’s the first large budget item.

        So not really all that tucked away when you think about it. It is the first ongoing responsibility that requires actual actions be taken by the government. The other items are largely related to how the government should be created, this is something they do on an ongoing basis.

        5. Promote the general welfare. Again, not much of a to-do. More of a guiding philosophy…. the activities of the government should be directed at promoting the general welfare.

        So maybe you have a point. A dual headed responsibility to the people – to provide a system of justice and to defend the people.

        How would our government look if that was the laser-focus of all federal activities? Ya think we could get by on 20% of what we spend right now and still provide a framework of justice and defend the people? Sure, it would be dissapointing not to have all of my favorites any more…. NASA, NIH, NSF…. I love those things.

        1. But, but, what about the roadz? And the children? And the children’s roadz?

    2. An unjust government which is competent at defense would be a terrible combination.

      Isn’t that what we have now?

      Also, you know who else funded a war?

    3. An unjust government which is competent at defense would be a terrible combination.

      Isn’t that what we have now?

      Also, you know who else funded a war?

      1. Zionist Squirrels, so we’ve been told?

        1. Not just the Zionist Squirrels, All Squirrels!!!11!!!eleventyone!!!111!!

    4. Liberty and justice were important to the Constitution makers of 1787. However, the functions to promote justice were largely the responsibility of the several states – the federal role was very restricted.

      Here’s what Madison said when promoting ratification of the Constitution: “The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce … The operations of the federal government will be most extensive and important in times of war and danger; those of the State governments in times of peace and security.” (The Federalist No. 45)

      Hinkle is talking about the federal government – one can make a good case that defense is the major function granted to the feds. Justice is key, however the federal government’s limited role should not be expensive. It was articulated quite nicely by Jefferson in his First Inaugural Address: “a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned.” This should not require a major commitment of resources.

      1. The federal government has a secondary role in defense too. The primary role in defense is the state/local militia. Constitutionally, the feds main defense role is to SUPPORT the militia.

        Not surprisingly, the militia was gutted in the process of ‘supporting’ it – so the feds can now ‘defend’ Afghanistan with a standing army instead of the US with a local militia. And a whole bunch of folks can then proclaim that defending Afghanistan is the one indispensable function of the federal government.

        And the Afghans can’t even eat the pork we so generously send them

    5. Maybe because without meaningful security/defense, principles of justice, freedom, and liberty are in an elevated state of jeopardy.

    6. At least national defense is a constitutionally MANDATED duty of the federal government. None of this welfare/entitlements/giveaway bullshit are legitimate federal activity. Cut that shit first.

  6. it can become a vehicle for raising taxes rather than constraining spending.

    I’d be OK with raising taxes if I thought it would actually be used to balance the budget. However, it’s much more likely that it would merely be wasted on something else and we’d still have to borrow. That said, an amendment of some kind is the only way spending will be brought under control. I like the idea of a fourth ‘branch’ of government whose responsibility would be to audit the other branches. It would have to report whether the budget was balanced. Hopefully, we could get accurate numbers as to debt and deficits, etc., minimizing the political games played with the numbers.

    1. How to account for an income statement, which is what the budget is, is complicated. There currently are different rules for public company reporting, tax reporting, charitable organizations, government entities, etc. If you’re a politician and you want to allow more spending in a balanced budget environment all you have to do is get the government to change the accounting rules, or interpret the rules differently.

  7. How incredibly na?ve. Washington isn’t interested in curbing spending. Spending is the mother’s milk of politics. Without spending, how would politicians embezzle the money they need to insure their reelection? A balanced budget is a pipedream. We are on a slow boat to financial ruin. This has been true for at least a few decades. The only possible way we can turn things around is with a revolution at the ballot box. Stop reelecting incumbents and maybe we’ll have a fighting chance to “right the ship”. Short of that, it isn’t looking good.

    1. Yep. Hinkle’s premise is that we can fix the debt problem if politicians start to care about the debt problem. Brilliant.

  8. Pop quiz: which of these is different form the others?

    balanced budget amendment
    sequestration
    limiting spending increases
    Garfield the Cat

    Of course the answer is Garfield, which, as dumb as the cartoon is, at least raises a chuckle once in a while. The others are just smoke and mirrors which give politicians more cover to hide their evil ways.
    No government can ever be reigned in by such easily-bypassed matters as long as that government defines its own limits.

    1. I’m more of a Dilbert fan.

      1. Maybe there could be a ‘Garfield Versus Dogbert’ crossover graphic novel?

        1. I’d be rooting for Dogbert. Don’t know how this rumour started that I like Garfield. I want to put it on record that Garfield is about the unfunniest comic I have ever seen, even more so than Apartment 3G or Mary Worth.

          1. Dogbert for congress!

            t

          2. Mary Worth is unintentionally funny at times.

  9. Yep: More here. http://pjmedia.com/blog/theres…..us-budget/

  10. This idea has been around for a long time.I remember it being discussed in the early 90’s,of course G.H.W Bush and congress raised taxes instead.

  11. Another simple solution is to just raise the full retirement (and medicare) age by 2 months per year. It’s slow to have an effect, but the long term savings is fantastic.

    1. And about ten years from that everyone starting to pay in will quickly realize that they will most likely never see a dime of ‘their’ money. Some short time later nobody will see a dime of ‘their’ money either.

      NTTAWWT, just that it means it will never happen. If only because it is a planned collapse.

      The collapse will come, but it will not be planned.

  12. “America’s debt is now bigger than America’s economy….” Why does Hinkle think this is meaningful? He’s comparing a balance sheet item to a production item (I’m assuming he means GDP when he says “our economy” but that’s just conjecture). Our debt may be a problem, but this statistic doesn’t prove it.

    1. Lies, damn lies, and statistics…

    2. Well start with reading Rogoff and Reinhart’s, “This Time is Different.”

  13. What you need to do is cut spending AND taxes and stop worrying about the deficit. You are barking up the wrong tree here.
    “devour every single dollar Washington collects in taxes. Everything else, from education to national defense, will be funded by further borrowing.”
    That’s not really how it works. Spending happens in a cycle. Washington does not “devour” dollars.
    If you linearise the process and start at spending, you see the federal government spends, the money is then respent and an amount of real activity happens and some returns as tax.
    The key thing is even if there is a 0.5% tax rate and a huge amount of spending, if there is NO saving in the spending chain then the government gets ALL its money back. No matter how wasteful the spending. The problem with wasteful spending is it wastes resources. And if spending exceeds resources
    Similarly with interest spent, which generates an amount of tax and saving that is “borrowed” back.
    Deficits are not under control of the government, they depend on private sector decisions to spend and save.
    Do you see now?

    1. (cont)
      One way of looking at it is the US federal government effectively always spends by creating money (crediting bank accounts) and taxes by destroying money (debiting bank accounts.) This generates an asset for the bank (reserves/vault cash) and a liability (demand deposit.) Assets and Liabilities expand. It is functionally similar to a private bank creating a loan.
      The US could eliminate the “national debt” by “printing money” in other words the silly platinum coin gimmick, and the effect would be negligible.
      There are no financial constraints to the government crediting a bank reserve account, other than self imposed ones such as the debt ceiling. This is unlike a currency user like a household, business, state government or Eurozone country.
      “If Congress wants to eliminate the Defense Department and reallocate all of its funding to a newly created Department of Rainbows, Unicorns and Butterflys, it can do that too.”
      If Congress eliminates the Defense Department then that means the real resources used by the Defense Department are now free. The Department of Rainbows, Unicorns and Butterflys will need resources to accomplish its tasks, which may be different and in short supply.

      1. (cont)
        “While other European nations’ government debt was growing, Swiss debt shrank.”
        The Swiss have an export surplus and their government was “printing money” and swapping it for forex. The Swiss exporters then earned say Euros, and paid taxes and wages in Swiss Franc. This exchange made it look like the govt was not injecting money – but it was, via the external sector.
        They are in trouble now since the peg went in January.
        Another example is the Japanese government, which has had high government debt for several decades now and copious amounts of “QE” with continued deflation.
        In conclusion, the debt of a currency issuing government is not a major issue under present arrangements (or doesn’t have to be.) It can be seen as “non government sector savings” and libertarians should let deficits “float” and focus on reducing the overall size of government via tax and spending cuts.
        And the first cut would be bond interest by minting the coin.

        1. After all that, I’ll bet Jim Grant’s bow tie is spinning.

  14. Reducing total spending increases to 2% a year sounds reasonable enough, but the real question is how sharply entitlements would need to be cut in order to hit this target.

  15. Mr. Hinkle,

    Attempting to hold spending growth to 2% cannot balance fiscal expenditures.

    Firstly, the fiscal balance will vary regardless of what efforts government makes given inter-sectoral flows are determined by the spending and saving decisions of the non-government sector. If in aggregate it spends less than its income the government’s fiscal balance will move toward deficit.

    Secondly, government spending is the sole source of net financial assets in the non-government sector. Reducing spending therefore reduces its accumulation of financial wealth and, as a matter of accounting, reduces the government’s revenues. A spending cut is equivalent to a tax increase as a matter of financial flows.

    Third, government is the monopoly supplier of U.S. Dollars. Reducing spending below GDP growth requires that financial assets come from either the foreign sector (impossible as there is no chance of the U.S. running a trade surplus) or accelerating accumulation of private credit and debt. Your article does not point out that Switzerland’s reduction in public debt required record levels of household debt nor that other countries you list have stimulated their economies via combination of rising private debt and trade surpluses.

    Fourth, $18 trillion in government liabilities is $18 trillion in non-government assets. Reduce liabilities and reduce assets.

    1. Ok, so I’ve seen your posts before, and try as I might I still don’t get what you’re saying. Let me try to poke holes in it:

      1. I am a government with a 10% sales tax and no expenses. How the hell am I running a deficit? Sure, maybe I’m missing out on really cheap loans the private economy would be willing to make, but I don’t have to take those loans.

      2. When you say “net financial assets”, you’re only talking about government debt, right? If Uber grows from $0 to $10,000,000,000 in 5 years, the capital gains aren’t revenue in your model?

      3. The fed can accept any collateral it wants in exchange for US dollars, can it not?

      4. Reducing the debt (by paying it back) means giving cash to whoever owns the treasury note. The US wipes out their debt (but loses cash), and the lender wipes out the note, but receives cash. There’s no reduction in assets on the private side.

      1. This guy sounds like a proponent of the neo-keynesian Modern Monetary Theory, of which I’ve heard people who subscribe to that say some outrageous things. The belief that US debt outstanding is directly proportional to the amount of liquid wealth is one of the things they say, and doesn’t make any sense.

        “Reducing spending therefore reduces its accumulation of financial wealth and, as a matter of accounting, reduces the government’s revenues. A spending cut is equivalent to a tax increase as a matter of financial flows.”

        Stuff like this. We could cut spending massively, run a surplus, pay down the debt completely, and the non governmental sector would be fine. US Treasures are used liquid assets in the private sector, sure, but paying them off by the government would mean that private assets and debts would just take their place, and THAT would massively boost the private sector.

        1. Also,

          “Third, government is the monopoly supplier of U.S. Dollars. Reducing spending below GDP growth requires that financial assets come from either the foreign sector (impossible as there is no chance of the U.S. running a trade surplus) or accelerating accumulation of private credit and debt.”

          Not really at all. There’s only about 1.5 Trillion dollars in circulation. Replace worn out cash and keeping inflation at 2.5% the government would only need to spend about 40 billion newly created (i.e. no tax necessary) dollars per year. Anything beyond that is unnecessary to keep dollars supplied to the economy.

          And if we cut spending to where we could run a surplus to pay down the debt, a lot of the repayment of paid off Treasury Bonds would be then loaned out (i.e. stocks and bonds) by investors and banks who formally held those bonds, but it won’t be that way for all of it. A lot of that money would be directly spent and invested by business owners in their own businesses; no new debt required.

          1. And seeing how the private sector actually generates wealth unlike the government sector, imagine what all that new private investing will do for the economy. It’ll go directly to business lending and the stock market instead of being devoured by the government building fighter planes that will be obsolete and replaced by UAV’s in ten years.

            It’ll build buildings and businesses that could generate real wealth for generations in the private sector rather than simply be a temporary expenditure and paycheck to some governmental employee.

      2. Christophe,

        Lomg response in two comments:

        1) No government in the U.S. will have zero expenses but let’s assume your premise in a very simple model. Non-government spending is $100 with sales tax of 10% annually = taxes of $10 in first year. Non-government spending next year drops to $90, $81 next and so on. Each year private incomes fall unless made up by taking on loans or running surpluses against the foreign sector.

        If government were spending that revenue in the first year taxes would be $10 and spending $10 (balanced budget). Now if in a given year the non-government reduces its spending to $90 due to disaster, desire to hedge against future uncertainty, etc. government revenue falls to $9 but spending is still at $10; it has moved to defict through no action of its own.

        2)Net financial assets are non-government assets with no corresponding non-government liability. If you take a $100 private loan from your bank this creates a deposit in the banking system. That deposit is your asset and the lender’s liability, while the loan itself is your liability (you have to pay it back) and the bank’s asset.

        $100 in private assets + $100 in private liabilities = zero; no net increase in total private financial wealth.

        $100 spent into your hands by government is $100 in your assets and $100 in government liabilities. Private financial wealth net increases by $100.

        1. Except it didn’t, because the government sucked that money, or those assets, out of the economy to start with ( taxes ) and subtracted a management fee from it ( costs of operation ).

          The magic happened when I created, or the people I work for created, $100 of additional value in the economy, increasing total assets. The government can’t do that by creating
          bookkeeping entries. The local car dealer won’t accept those for the Corvette I want.

      3. Christophe,

        3) The problem is that net-transfers wealth to government from non-government. If I use my bonds as collateral for a $100 loan from the government sector I personally might use the $100 for something profitable and come out ahead. But look at the accounting in terms of the non-government as a whole: $100 deposit is my asset and government’s liability, $100 loan is my liability and government asset. Loan + liability = net change of zero, meaning no net increase in non-government financial wealth. If government charges interest the net change will reduce private wealth by transferring more than the total loan to government.

        4) a. U.S. goes into deficit spending. This creates a reserve deposit of $100 and a checking account deposit of $100.
        b. U.S. auctions $100 in Treasuries. If you buy them your checking account is debited $100 by the bank, the bank’s reserve account is debited $100 by government (because government only accepts reserves) and the bank’s securities account is credited $100. So the reserve and checking transactions cancel out but the securities show a net financial increase of $100.

        c. If you redeem at maturity the securities account is debited $100, bank’s reserve account is credited $100 and your checking account is credited $100 (plus interest of course). The net increase in financial assets has moved from the securities account to the reserve account.

    2. Bringing the increase in spending closer to the rate of inflation of the money supply is the difference between a parasite that kills it’s host and one that does not.

    3. Holy shit, that’s a lot of wind moving for the purpose of dropping a big load of bullshit. As if government spending is what actually drives private sector growth. Which appears to be the theme of your nonsensical nonsense. Take it over to Salon. i hear they lap that shit up over there. Or maybe save it fro the next Krugman circle jerk session.

      The gains from reducing/eliminating QE alone will have a huge benefit by not stealing anymore money from the private sector. And so much more.

  16. “Mandatory social-welfare spending”

    Most of that money goes to the government enabled medical mafia, which can shake us down for whatever we have, because we are not *free* to buy medicines and medical care from whom we would choose, but instead must go through the mafia for what we want.

  17. What precisely is the problem being addressed by these proposals?

    1. There are no problems comrade tony!

      All problems were outlawed at last party conference.

    2. You seriously see no issue with massive deficit spending that is supported through steadily increasing our money supply and accumulating massive debt?

      1. Meh. Maybe I would if you could describe it.

        1. Do you even understand what I said?

  18. So, the biggest argument against this column is that a true Scotsman would never do less than two steps?

  19. “Fifty years ago defense accounted for 7.2 percent of GDP; now it’s 3.5 percent. ”

    3.5%?
    Um, no.

    No matter how you do the math, it’s WAY more than that. If you include veteran’s benefits, international aid (training, arms, etc) it’s staggering. Include a lot of the DHS money, this is WAY over 20% into the 25%+ range.

    You can just Google “what percent of the us budget is spent on the military” or something of your choosing, then pick a source that seems reasonable. Pick 10.

  20. “Government should adjust its rates of expenditure and taxation such that total spending in the economy is neither more nor less than that which is sufficient to purchase the full employment level of output at current prices. If this means there is a deficit, greater borrowing, “printing money”, etc., then these things in themselves are neither good nor bad, they are simply the means to the desired ends of full employment and price stability.”

    ? Abba Lerner, “Functional Finance and Full Employment”(1943)

  21. Google pay 97$ per hour my last pay check was $8500 working 1o hours a week online. My younger brother friend has been averaging 12k for months now and he works about 22 hours a week. I cant believe how easy it was once I tried it out.
    This is wha- I do…… ?????? http://www.online-jobs9.com

  22. Cut the size of the beast by 99%.

    Problem solved !

  23. That same broken record? Again? How about drafting a plank to abolish the personal income tax, then work on a referendum initiative to put it on wheels? I will lay heavy odds that once corporations can no longer use men with government guns to shift their bill onto individuals and sole proprietorships, a way will be found to cut federal spending.

  24. Several people commented on how naive and unlikely it was to suggest limiting government growth to 2 or 3 percent a year. And they’re quite right. Nonetheless, put this kind of idea out prominently in the political debate, and then hit people over the head with the idea that government growth is currently considerably more than 2% – 3% and dare them to come up with an alternative plan.

    1. Or rather, that the idea would work because government growth is considerably higher than 2-3% per year. It could be a great talking point for anyone who favors limited government.

  25. Since fiscal policy debates tend to focus on how to eliminate red ink and balance the budget, I may as well take advantage of this misplaced focus to push a policy that would be desirable even if we had a budget surplus.

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