Deficit reduction done wrong
One of the stranger boasts to emanate from President Obama’s beleaguered defenders is that he worked some sort of deficit-reduction miracle, because this year it’s down to $680 billion from his customary $1 trillion or more. Yay! Obama’s deficits are now only $230 billion higher than George Bush’s worst deficit, leaving the Empty Chair on track to just barely accumulate more debt than all of his predecessors combined. The New Normal is all about lowered expectations, but this is ridiculous.
The Wall Street Journal took a look at this year’s deficit reduction marvel, and found it to be a combination of budget caps, sequestration, and tax increases. Democrats can’t wait to get rid of the first two, and have more of the latter, even though the Journal argues that it’s one of the reasons we’re mired in sub-par economic growth, which depresses revenue:
The more important story is why the fiscal picture is improving, at least for the time being. The main reason is higher revenues, which rose a whopping 13.3% for the year to $2.77 trillion. That’s a new federal revenue record, surpassing the previous high of $2.57 trillion in fiscal 2007.
Individual income and payroll tax receipts shot up by 16.3% and 12.1% respectively, due in part to the Obama income tax increase in January and the end of the two-year payroll tax holiday. Revenues are now back to 16.7% of GDP, which isn’t that far off the 40-year average of 17.4% but still trails the 17.9% in 2007 before the recession. That 40-year average has declined from more than 18% due to the recession and historically slow recovery since 2009.
Revenues would have climbed even faster in 2013 if growth resembled what it was in the economic expansions of the 1980s, 1990s or mid-2000s. An economy growing by 3% or more tends to throw off revenues above 18% of GDP or more, but the last 12 months have seen growth of only about 1.8%. The revenue gains from Mr. Obama’s higher tax rates were thus offset in part by the slower growth caused by the higher tax rates.
I don’t see anything to celebrate in the news that our federal government hit a record high in the amount of income it siphons away from the private sector… and $2.77 trillion still isn’t enough for it. That’s a huge amount of compulsion to dump on a nominally free society. Virtually everything the government does amounts to the exercise of compulsive force, including both the act of taxation and the effect of spending those seized dollars.
There’s a funny little game statists love to play with the concept of opportunity costs. That’s the cost of sacrificing what could have been done with time and money that has been invested elsewhere. Much of Big Government spending is justified by the allegedly horrible opportunity cost of leaving all that money and decision-making power in private hands. You might look upon the sad results of Barack Obama’s trillion-dollar “stimulus” plan and find little evidence of any stimulation, but an Obama apologist will insist that awful, terrifying, unspeakable horrors awaited if the government didn’t throw all that money around. Why, the unemployment rate would probably be 20 percent by now, or something. Never mind that it didn’t get anywhere near the low levels Obama promised when he took the money – rest assured that things would have been unimaginably worse otherwise.
But the private sector is never allowed to talk about opportunity costs. We’re not supposed to think about growth that could have occurred, jobs that might have been created, business expansion that didn’t take place. Impossible standards of proof are demanded to justify claims of private-sector opportunities lost, while the claims of statist politicians must be taken at face value, without question. The prosperity lost to high taxes and astronomical government spending – which, again, involves as much compulsion and lost opportunity as seizing the tax money, sometimes more – must be sacrificed without consideration. The free future dies unmourned, while the expansion of government is inevitable and irreversible, and the meager results of its policies must be accepted as the best of all possible worlds.
The American people must demand better. Are we supposed to be comfortable with carrying $20 trillion or more in debt, forever? Or are we going to try paying that astronomical sum down? Obama’s wild spending spree was supposed to be an “emergency” measure, but I don’t hear anyone in the Administration discussing even long-term plans to get the debt back to the already unacceptable $10 trillion that waited for him when he took office. That would require far greater reductions in spending, coupled with growth-oriented tax and regulatory reform designed to sustain economic growth of 3 percent or higher. There is no level of taxation that can come remotely close to achieving what is necessary.
Anyone who fails to present a concrete plan for achieving those goals is not serious about “deficit reduction” – they’re just looking to score a few laughably insincere political points off a transitory headline, even as the bloat of Big Government strains to burst from the flimsy girdle of modest sequestration budget restraint, which is in turn presented as the most extreme diet the central government could possibly undertake. Just wait until it starts scarfing down more ObamaCare Twinkies and packing on serious pounds again. And wait until you hear the screams of outrage about poor people dying in the streets if you try to take those Twinkies away! The same Democrats boasting about a supposedly svelte $680 billion deficit are determined to shatter the sequestration measures that made it possible, and ensure nothing like that ever happens again.