DownsizeDC.org
January 5, 2010
Can we afford more deficit spending?
By James Wilson

The Second Session of the 111th Congress begins today. Let's tell them what their priority should be this year.

Tell them to cut federal spending!  https://secure.downsizedc.org/etp/campaigns/104

You may borrow from or copy this letter:

In 2000, President Clinton projected that the national debt could be eliminated by 2009. http://clinton4.nara.gov/WH/new/html/Fri_Dec_29_151111_2000.html

Instead, politicians from both parties have increased the national debt burden to over 90% of GDP, and now you guys are running even bigger deficits, supposedly to boost the economy. But there are two problems with this . . .

First, the economy did better in the 1990s when government deficits were smaller. Over the course of that decade,

* federal spending increased by 13% in constant dollars, while
* the economy grew by 37%

In contrast, during the eight years of George W. Bush  . . .

* federal spending increased by 35.6%, while
* the economy grew by just 18%

And this was before the housing bubble burst!

These facts indicate that increased government spending actually hurts the economy. The reason for this should be obvious.

The more the government spends, the less capital the private sector can utilize. Moreover, while federal spending may put more money in the hands of some people, it does not transform or "stimulate" the economy the way innovations in the private sector do.

The second problem with deficit spending is that we can no longer afford it. Consider this from John C. Goodman in Forbes: http://www.forbes.com/2009/05/19/medicare-ticking-bomb-opinions-contributors-goodman.html

"For some time, Social Security and Medicare combined have been paying out more than they are receiving in dedicated taxes and premiums. To cover that deficit, we have been drawing on the general revenues (mainly income taxes) of the federal government. Currently, we are taking more than 1-in-7 income tax dollars for this purpose. By 2020, it will be 1-in-4, and by 2030, 1-in-2. Basically, elderly entitlements are on a path that will crowd out spending on every other federal program. Throw in Medicaid, and health care spending alone will crowd out every other thing the federal government is doing by mid-century!"

Please do our economy and the next generation a favor. Dedicate this year to getting the federal government's fiscal house in order, NOT by increasing taxes, but by cutting spending, immediately.

If you do this, I'm convinced that voters will reward you in November.

END LETTER

You can send your letter here: https://secure.downsizedc.org/etp/campaigns/104

And please consider making a contribution to further our work. https://secure.downsizedc.org/contribute/

Jim Babka
President
DownsizeDC.org, Inc.

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