Now they’re worried about debt?

28 May

So-called Blue Dog Democrats in the House of Representatives are worried about the latest bill to increase spending and raise taxes before the May 31st deadline, when extended unemployment benefits and Cobra health insurance subsidies expire.  The $146 billion spending bill may not be voted upon by today, the last working session before the end of the month, unless the House will meet on Memorial Day weekend–a highly unlikely situation even for the most committed welfare state advocates in Congress who want to spend, spend, and spend.

To pay for the additional spending, the bill calls for targeted tax hikes, reducing the net spending to $90 billion over ten years.  However, since the federal government will be running trillion dollar deficits for years, this additional spending has to be borrowed, adding tens of billions dollars to the national debt.  In other words, the federal government has an unlimited credit card it is using to pay for current expenses, a recipe for financial disaster.

All current government expenses should be paid for out of current revenues.  That is the way most individuals and businesses operate to avoid financial excesses.  But under the sway of Keynesian economics, namely, that the federal government must take up the spending slack during a recession/depression because businesses and individuals cut back their expenditures on equipment and goods, the budget deficits explode in order to pay for unemployment benefits and every imaginable spending program to prop up the economy.

Instead of allowing the economy to adjust after the collapse of the bubble caused by the FED’s easy money policies, federal government housing subsidies and lax lending practices at banks and other financial institutions, the federal government “stimulates” the economy to keep the economy humming along, postponing the day of reckoning.

The Blue Dog Democrats want to close the proverbial barn door after the horses have left.  Both Republicans and Democrats have voted for irresponsible spending for decades and the problems have been magnified the past three years as the financial bubble burst revealing how shaky our economy is.

Congress and the Obama administration have no credibility on fiscal responsibility.  They have followed the Keynesian playbook to a tee—massive deficit spending and mind boggling money printing–and the economy is recovering every so slowly as the national debt piles up.

To end the disastrous welfare state experiment in America, a total restructuring of the federal government is needed.  Unfortunately, members of Congress and the Obama administration are not about to overhaul the welfare state  or even begin the process of downsizing the federal Leviathan.

Waiting on the sidelines is the last hope for America, the people of the United States and holders of U.S. debt around the world who will say “no mas” to the massive debt that the U.S. Treasury will have to sell to keep the welfare state on life support, and they will also say “no mas” to the inevitable depreciation of the dollar that will follow as the Federal Reserve purchases most of the debt to prevent interest rates from rising dramatically.

Comments Off on Now they’re worried about debt?

Posted in Federal Reserve, Spending, Taxes, Welfare state


Comments are closed.