Government Spending (and some of you are angry about just $120 in new tax for Peachtree Corners)

Greetings,

Over the last several months of blogging about the upcoming Peachtree Corners incorporation vote one of the most common and strongly felt lines of opposition has been that government is already too big and that spending is out of control.  Being a fiscal conservative myself I can relate strongly with this line of thinking especially in current times with federal spending seemingly out of control. 

The current debate about incorporation has limited financial impact (in the big scheme of things mind you $120 of new tax is really not that big a deal when compared to potential changes in income tax rates, social security tax, etc) on most of us so any articles or comments I had regarding anything financial had to be fairly limited in scope as discussing things like the federal budget were really beyond the scope of a blog about the incorporation of Peachtree Corners.

Starting today I will be adding in articles about government spending, taxation (levels, history, comparison globally, etc), deficits, debt, etc.  I have had a real interest in this area for several years and now due to our country's dire financial situation many other people are developing an interest in this area as well so it seems like a real opportune time to have a discussion about it. 

Even though there is a rising interest in this area it still seems that many, if not most, people do not even have a true understanding of where their money is spent or where government revenue actually comes from though this is an issue that has a profound impact on your wallet (how much tax is taken out, impact on interest rates, economic growth, etc).  It is something we all should be very interested in but many of us have a knowledge base that does not stretch beyond the sound bites we hear on TV or what the local talk radio host tells us.  The real story is much more complicated and in a way much scarier. 

Most of you remember the recent debate about extending the Federal Debt ceiling.  There was much political grandstanding about the pros and cons of extending the federal debt ceiling beyond $14.3T.  During the debate there was a lot of talk about “reducing the debt” by anywhere from $1T to $4T.  Countless committees were formed (the VP’s group, the Gang of Six, Simpson-Bowles, etc.) to figure out the best way to reduce the debt.  The scary thing is this - All the talk about reducing the debt was never going to actually reduce the debt!

The President spoke of a “Grand Bargain” to reduce the debt by up to $4T.  The reality is that current projections show the debt is on track to grow an additional $10T over the next ten years.  $10T in ten years!!  (To give you some perspective our national debt was just under $1T in 1980.  From 1789 to 1980 – 191 years – the Republic had accumulated under $1T in debt and now we run $1T annual deficits without batting an eye). 

 The “Grand Bargain” was simply going to reduce the amount of NEW debt from $10T to $6T.  So in 2021 our national debt would be $20.3T instead of $24.3T.  In my book this is not a “cut”.  This is like someone saying “Yeah, I have really lost a lot of weight lately.  Instead of going from 175 lbs to 250 lbs I only went to 230 lbs.  I’m doing great”.  Most people would say “What the heck are you talking about?  You just gained 45 lbs!”  Only in government speak could adding “only” $6T in debt be considered a cut. 

 The “Grand Bargain” was considered an unprecedented and courageous step by pundits to help shore up our finances.  I don’t know about you but adding ONLY $6T of new debt instead of $10T of new debt does not seem that courageous to me.  In my mind true political courage would have been providing 1) a plan that adds $0 new debt over the next ten years (mind you that means by 2021 the national debt is $14.3T so you would take on debt in first years and eventually run surpluses at the end that would result in no net increase.  I am not advocating the Sean Hannity approach of no new debt past $14.3 immediately) and 2) a long term plan for eliminating the entire national debt.  This talk right now is nothing more than rearranging the deck chairs on the Titantic. 

I have ideas of how that could best be done but I am interested in hearing from others on how they would turn our financial ship around.  Based on the feedback I have gotten about adding just $120 in new taxes for Peachtree Corners I know there are some hard core fiscal conservatives out there so I am waiting to hear what you have to say.  You may have a plan other than what I laid out so feel free to offer whatever your plan is and how that would be accomplished.

To give you a starting point I have provided a summary of the FY2011 budget that provides a limited breakout of revenues and expenses.   This will give you an idea of where we are now so you will have some actual data to work with on how to balance our budget.

PS....  For the record I believe many types of government spending produce immense dividends (remember that internet thing Al Gore personally invented?) so I just want to clarify that I AM for smart government spending that grows the economy and increases our bottom line.  I am strongly against wasteful government spending (bridge to no where, studying mating habits of insects, etc).  To tie this in to our local situation....many of you are strongly against incorporating Peachtree Corners because of the extra taxes.  Rest assured if I thought this was something that would not help my bottom line and your bottom line and was just another government boon doggle I would be wailing away against the idea with the same intensity I am advocating for it.  But hopefully you can tell from my stated belief that we should totally eliminate the national debt that I am for doing radical things if necessary to help us maintain our economic superpower position so I would never support an idea like incorporation if I did not think it would benefit all of us here in Peachtree Corners immensely.