The REAL Problem with Deficits

Again from the NYT — THIS ARTICLE actually takes a look at the real problem with governmental deficits. Deficits, by definition, are expenses greater than receipts. So we have TWO important factors to look at:  expenses and receipts.

Increasing tax revenue addresses receipts. Cutting government services addresses expenses. Closing any deficit means addressing theses items, however, a rift seems to exist in people’s internal bias towards one of these solutions.

The NYT has finally done the math and has figured that for at least a few instances, raising taxes alone will not close these deficits. At a National (Federal) level this is true beyond belief. Taking total Federal financial obligations at today’s value exceeding $100T (when one considers bond debt, healthcare obligations, and pension obligations) and total Federal receipts annually of about $2.5T currently, one can see that Federal deficits cannot be cured by addressing only receipts. Our Federal spending problem must involve cuts in Federal spending–massive cuts.

Our Founders anticipated out of control government spending, which is why they designed our system as they did. From Federalist 45:

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; with which last the power of taxation will, for the most part, be connected. The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.

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. As the former periods will probably bear a small proportion to the latter, the State governments will here enjoy another advantage over the federal government. The more adequate, indeed, the federal powers may be rendered to the national defense, the less frequent will be those scenes of danger which might favor their ascendancy over the governments of the particular States.