Friday, February 06, 2009
Why Do We Have a Budget Deficit? Look to Congress, Not the President
When it comes to budget deficits, the sitting President usually seems to get the blame for them. In fact, the President can't spend a dime of taxpayer funds that the Congress doesn't appropriate. It's true that President Bush left office with a budget deficit but the deficit President Obama has inherited is mostly the creation of a Democrat controlled Congress. At the end of fiscal 2006, when Republican control of congress ended, the budget deficit was $248 billion. That's bad enough and the Republicans lost control in large part because they forgot why they were sent there in 1994 and acted like Democrats. They spent every thin dime of tax revenue that came into the Treasury and then some. And it certainly didn't help that it took until 2006 for President Bush to find his veto stamp. Perhaps if he'd reined in the Congress, the Republicans might have held onto it.
I expressed hope after the 2006 elections that 1.) the Republicans would learn their lesson and remember that people vote for them because they profess to be in favor of small government and fiscal discipline and 2.) that the Democrats would act responsibly, now that they'd been handed the car keys. No such luck. The deficit for the end of fiscal year 2008 ballooned to $407 billion and that was before the ill-conceived and hastily passed $700 billion TARP. Now President Obama is demanding that the Congress pass an $800 billion to $900 billion "stimulus" bill that will deepen the deficit even further and leave the bill for future generations to foot. Remeber who controls the purse-strings. It's the Congress. The hole may have started under a Republican Congress, but it's the Democrats that have kept on digging. The first rule of holes states that when you find yourself in one, you stop digging.
How do we stop this hole from getting deeper? We have to stop spending more than we bring in. No matter where you set marginal tax rates, receipts to the treasury will not exceed about 19.5% of GDP. Congress is currently spending about 21.5% of GDP. Spending has to be brought into line with GDP and if we want to really increase tax revenues (not rates, revenues) we need to grow GDP and the quickest way to do that is to reduce tax rates. Leave money in the productive economy, i.e., the private sector and we will start to come back. Unfortunately the Democrats are more concerned with punishing the "evil rich" and redistributing wealth than they are with actually solving the problem. They can do a lot of damage over the next two years and the Republicans need to point this out loudly, often and stick together to resist the systematic looting of the private economy by the statist, power hungry monster that is the Democrat Congress.