America Is Spending Out Of Control

Despite all the various causes for the current economic mess we're in (Fannie/Freddie, subprime mortgages, Democrats, etc.), there's another root cause that I don't believe gets enough attention: we are simply spending out of control as a society.  Read this article at the Wall Street Journal from early September to see what I mean:

Here's a prediction: The media will report today that the federal budget deficit is big and getting bigger. What most of them won't report, alas, is that the cause of these deficits is an explosion in federal spending. The era of big government is back, bigger than ever.

The real news in yesterday's Congressional Budget Office semiannual report is that federal expenditures on everything from roads to homeland security to health care will on present trends reach 21.5% of GDP next year. That's a larger share of national output than at anytime since 1992. If the cost of the federal takeover of Fannie Mae and Freddie Mac prove to be large and are taken into account, next year federal outlays could be higher as a share of the economy than at anytime since World War II. In this decade alone, federal spending has increased by almost $1.2 trillion, or 57%.

The federal deficit is expected to hit $407 billion for fiscal 2008 (which ends at the end of this month) and $438 billion next year. Still, the deficit is expected to be only 3% of GDP, which is in line with the average of the last 30 years. We hope Congress and the Presidential candidates don't obsess over the deficit per se, because the real fiscal drag from government comes from how much it spends, not how much it borrows.

The Bush tax cuts also aren't the budget problem. Until this year federal tax collections have been surging. In the four years after the 2003 tax cuts become law, tax receipts exploded by $785 billion. This year revenues have declined by 0.8%, but a major reason is the $150 billion bipartisan tax rebate that has hit the Treasury without spurring the economy. Without these nonstimulating rebates, federal tax payments would have climbed another 2.5%, according to CBO. Revenue is expected to be a healthy 18.5% of GDP next year without any tax increase.

Another myth is that the war on terror has busted the budget. While operations in Iraq and Afghanistan are expensive, defense spending is $605 billion this year, or about 4.5% of GDP. That only seems large by comparison to the holiday from history of the 1990s, when defense fell to 3% of GDP. As recently as 1986, defense spending was 6.2% of GDP.

The real runaway train is what CBO calls a "substantial increase in spending" that is "on an unsustainable path." That's for sure. The nearby chart shows how much some federal accounts have expanded since 2001, and in inflation-adjusted dollars. This year alone, federal agencies have lifted their spending by 8.1%, with another 7% raise expected for 2009. There's certainly no recession in Washington. The CBO says that, merely in the two years that Democrats have run Congress, federal expenditures are up $429 billion -- to $3.158 trillion.

The fiscal blowouts have included a record farm bill, notwithstanding record farm income; an aid bill for distressed homeowners, extended unemployment benefits, and more generous veterans benefits. Next up: votes on $50 billion for Detroit auto firms, an $80 billion energy bill, as much as $50 billion for spending masked as a "second stimulus," plus $100 billion or more for the Fannie and Freddie rescue. Rather than sort through priorities, Congress is spending more on just about everything.

Meanwhile, remember that "pay as you go" spending promise that Speaker Nancy Pelosi made in 2006? We called it a ruse at the time, and the last two years have proved it. Senator Judd Gregg (R., N.H.) has tallied up at least $398 billion in "paygo" violations so far. Earmarks were also supposed to be cut in half by this Congress. In 2008 there were some 11,000 at a cost of $17 billion, the second most ever, and far more than half the peak of 14,000 in 2006.

The point to keep in mind is that this big spending blitz is coming even before a new President and Congress arrive next year with far more spending promises in tow. As they contemplate their choice for President, voters might want to consider which of the candidates is likely to be a check on Congressional appetites, rather than a facilitator.

This attitude in Congress is reflected in the American people, too.  I received an e-mail a while back for a new film called "I.O.U.S.A.", which blows the whistle on America's debt problem.  I haven't seen the movie myself (it's on my Netflix list), but I certainly agree with the concept.

In my mind, this all comes back to individual responsibility.  Those who have acted responsibly with their finances are not in financial crisis (with a handful of exceptions for genuine misfortune, of course).  Those who cannot or will not live within their means have racked up record debt in the most prosperous society ever seen on the planet, and are simply deferring their personal financial responsibility to pay it back.  This is exactly the problem with all of these federal bailouts that have been flung around in past months - the primary beneficiaries of those bailouts are the very same people who made poor or risky decisions in the first place, and the bailout is providing them an escape from their responsibility to own the consequences of those decisions.  As a result, it is the American taxpayer -- via our criminally generous Congress -- who ends up getting stuck with the bill.

This mentality is classic liberalism - people refusing to take responsibility for their own decisions.  Doesn't matter that they took out a $500,000 interest-only mortgage on a home that was worth $400,000 when your income was only $25,000 a year, you think you deserve to be bailout out so you can stay in your luxury home.  Doesn't matter that you have a cellphone, a DVD player, a color TV, air conditioning, and a car, you still deserve that government welfare check because you're too lazy to go get a real job. 

Liberalism is the mental sickness that corrupts people and creates fatal dependency in those who get infected.  Reckless and perpetual debt (both on a national level and an individual one) is only one symptom of the root cause - lack of responsibility.

So, let's start taking some responsibility.  If you make a mistake, admit it, learn from it, and don't repeat it next time.  Correct it before it becomes an unrecoverable error.  It's a lot easier to work of $10,000 in credit card debt than $50,000, isn't it?  If you have debt, create a plan to get out of it yourself.  Change your spending habits, change your living habits, sell something, get a new job, whatever.  There are as many ways to take responsibility as there are people in this world.  It's not easy, but you'll find it's ultimately the most rewarding and successful way to live your life.  If nothing else, you'll be confident that you have actually earned what you have, and you won't feel guilty about enjoying your life.  Those of you who have already done it know what I'm talking about.

For the rest of you, don't expect the rest of us to pick up your tab anymore.  That ship has sailed...you can sink or float on your own.

There's my two cents.