People have a good idea of how to spend their money. They use a pretty sound logic: no money, no spending. Unfortunately, not everything works that way, and not everything is as clear cut.
Government functions differently: no money, more spending. There is a $16.5 trillion debt, but there is additional spending. Congress extended the debt ceiling, yet again last week. The government is financed until May 18.
The only good thing that came out of extending the debt ceiling is the simple “No Budget, No Pay” rule. If Congress doesn’t pass a budget by May 18, then Congress doesn’t get a paycheck. This would force the U.S. Senate to pass a budget, which they haven’t done in the last three years.
As former Republican presidential candidate Jon Huntsman said, “Every American develops a budget they have to live within, and it’s time for our politicians to do the same or find other employment. Incentives matter. Adding a cost to kicking the can down the road is a terrific first step towards a more functional Washington.”
It just makes sense. Congress needs to cut government spending dramatically. They need to take several steps in order to prevent another debt ceiling fight and maybe then earn their salaries back.
First off, all government spending must be considered. Republicans need to accept drastic military spending cuts, and Democrats need to look at entitlement programs. The debt crisis will not be solved by raising taxes. This is not a revenue problem. The crisis will be solved once entitlements are cut and once the federal government accepts the fact that our army wasn’t intended to police the world.
The reality is that our government is on an unsustainable path. The debt is worth more than the economy at large. In February 2012, the debt was worth 101 percent of GDP. The issue becomes even more significant when there is no economic growth at all.
The U.S. had negative economic growth last quarter. The economy receded by .1 percent. The stagnant and depressing economy will increase the debt to GDP ratio and foster more uncertainty in the markets. That’s what’s happening in Europe. More spending and Keynesian economics are not the solutions to skyrocketing public debt.
Greece is in horrible shape because it’s not addressing spending. The U.S. is not like Greece, but current policies are leading us closer and closer to the Mediterranean. Congress keeps caving in and giving President Obama what he wants. Congress needs to work together with the president and address the debt.
Washington needs to sit down and understand that the debt is a real issue, and a serious one. Even Obama’s Former Car Czar Steve Rattner mocked Nobel Prize winner Paul Krugman for denying the debt problem. Those on Obama’s team are finally starting to think of the debt.
However, austerity is not the only solution to the debt. Cutting spending and reforming the tax code by simplifying it — lowering rates for all Americans while closing loopholes — will bring more certainty to the markets and allow the economy to grow, instead of making matters worse.
The time to act is now. The more the government waits and does nothing, the larger the debt to GDP ratio will become. The larger the gap, the more austere the reforms, and that’s something that all Americans want to prevent.
As tough as spending cuts will be, the government is far too big and was never intended to provide this many social services. As entitled as people think they are, the federal government needs to tell it like it is: you can’t always get what you want (sorry for the cliché).
The government must provide help to those who need it and not those who want it. That’s how government should function. It should spend what it has and cut back what it doesn’t need.