The Consequences of Big Government

Discussion in 'Economics' started by Tom B, Jul 13, 2009.

  1. Tom B

    Tom B

    The path we are on is unsustainable.

    The Consequences of Big Government

    By Robert J. Samuelson
    Monday, July 13, 2009

    The question that President Obama ought to be asking -- that we all should be asking -- is this: How big a government do we want? Without anyone much noticing, our national government is on the verge of a permanent expansion that would endure long after the present economic crisis has (presumably) passed and that would exceed anything ever experienced in peacetime. This expansion may not be good for us, but we are not contemplating the adverse consequences or how we might minimize them.

    We face an unprecedented collision between Americans' desire for more government services and their almost equal unwillingness to be taxed. The conflict is obscured and deferred by today's depressed economy, which has given license to all manner of emergency programs, but its dimensions cannot be doubted. A new report from the Congressional Budget Office ("The Long-Term Budget Outlook") makes that crystal clear. The easiest way to measure the size of government is to compare the federal budget to the overall economy, or gross domestic product (GDP). The CBO's estimates are daunting.

    For the past half-century, federal spending has averaged about 20 percent of GDP, federal taxes about 18 percent of GDP and the budget deficit 2 percent of GDP. The CBO's projection for 2020 -- which assumes the economy has returned to "full employment" -- puts spending at 26 percent of GDP, taxes at a bit less than 19 percent of GDP and a deficit above 7 percent of GDP. Future spending and deficit figures continue to grow.

    What this means is that balancing the budget in 2020 would require a tax increase of almost 50 percent from the last half-century's average. Remember, that average was 18 percent of GDP. To get from there to 26 percent of GDP (spending in 2020) would require an additional 8 percentage points. In today's dollars, that would be about $1.1 trillion, a 44 percent annual tax increase. Even these figures may be optimistic, because CBO's projections for defense and "nondefense discretionary" spending may be unrealistically low. This last category covers much of what government does: environmental regulation, aid to education, highway construction, law enforcement, homeland security.

    Whatever the case, the major causes of the budget blowout are well-known: an aging population and rapid increases in health spending. In 2000, Social Security, Medicare and Medicaid -- the main programs providing income and health care for those 65 and over -- totaled nearly 8 percent of GDP. In 2020, CBO projects that will reach almost 12 percent of GDP. But the deeper source of our predicament is a self-indulgent political culture that avoids a rigorous discussion of government's role.

    Everyone favors benefits and opposes burdens (taxes). Republicans want to cut taxes without cutting spending. Democrats want to increase spending without increasing taxes, except on the rich. The differences between the parties are shades of gray. Hardly anyone asks the hard questions of who doesn't need benefits, which programs are expendable and what taxes might cover remaining deficits.

    What long sustained this system was falling defense spending and routine, though usually modest, deficits. As defense spending declined -- from 9 percent of GDP in the late 1960s to 3 percent in 2000 -- social spending could rise without big tax increases. Deficits provided extra leeway. But these expedients have exhausted themselves. Deficits have risen to alarming proportions; in a risky world, defense cannot drop indefinitely.

    Obama would make matters worse. He talks about controlling "entitlement" spending (mainly Social Security and Medicare) but hasn't done so. He's proposing just the opposite. His health-care proposal would increase federal spending. He says he will "pay for" the added outlays with tax increases or other spending cuts, but what people forget is that every penny of this "payment" could be used (and should be) to close the long-term deficit -- not raise future spending and taxes.

    The latest excuse for avoidance is the economic crisis. True, deep spending cuts or big tax increases would be undesirable now; they would further depress an already depressed economy. But that doesn't preclude action. Changes could be legislated now that would begin later and be phased in -- a gradual increase in eligibility ages for Social Security and Medicare; gradual increases in energy taxes; gradual elimination of some programs. Such steps might improve confidence by reducing uncertainty about huge budget deficits.

    There is little appetite for any of this, and so we face the consequences of much bigger government. Certainly higher taxes for future Americans. Probably a less robust economy. The CBO notes that elevated deficits would penalize saving, investment and income, while unprecedented tax burdens could "slow the growth of the economy, making the [government's] spending burden harder to bear." To such warnings, Americans' collective response is: Go away.

    http://www.washingtonpost.com/wp-dyn/content/article/2009/07/12/AR2009071201533_pf.html
     
  2. Exactly RIGHT. Seems Obama is on a quest to SHOVE AS MUCH GOVERNMENT UP OUR COLLECTIVE ASSES AS POSSIBLE... as fast as possible... before we can take measure of it all and take steps to stop him and his Libtard minions ...

    The Founding Fathers understood that the concept of "freedom" necessarily included that government be small and non-intrusive into our personal lives... such that we might enjoy "life, liberty, and the pursuit of happiness"...

    WE'RE... R-A-C-I-N-G... IN THE OPPOSITE DIRECTION!!

    Nazi-esq intrusions!

    WAKE UP Obamabots! The entire US is going down the crapper, thanks to YOU!!

    :mad: :mad:
     
  3. skylr33

    skylr33

    Hey, that's the change these moron voters decided on. I'll be rolling on the floor laughing when this "socialized" health care get's passed, and everyone will eventually be forced to take insurance that is run by the Gov't. You will then have to wait three months to see a doctor, and several months more to schedule a surgery, no matter how urgent it's needed. You know how bad the health care system is run by the VA? Well, expect even worse treatment by our Gov't. under Obama's "socialized" health care plan. But again, that's the change the mental giants in this country voted for. Enjoy!!!!!
     
  4. .......................................................................................

    1000000% Correct !!!!!!!!

    But the question remains....as to "What Can/Will Americans Do About It "....?

    The solution is rather simple....

    The question becomes "implementation"....
     
  5. Eight

    Eight

    Medicare already is paying out more than it takes in as of a year ago... I thought that was not going to happen for decades, and the boomers have barely begun to draw on it... I really don't think these malpracticing liberal media hound dogs are mentioning that at all...

    Martin Armstrong discovered a cycle in political thinking. Currently we are in the part where people believe that government is the answer. All these calls for them to wake up are for nothing, they are not going to wake up. Maybe when inflation eats their SSI and savings up and they are losing everything and going hungry, then MAYBE some of them will wake up but I'd say most would want government to bail them out...
     
  6. I remember when the Medicare bill was signed into law with not only aplomb but the comment, "....probably will never exceed $1B per year...." :(
     
  7. Whenever we have companies who are "too big to fail" don't they just act as a proxy for government? Yet I never hear about the Consequences of Big Corporations. Getting health care rationed by an insurance company bureaucrat is the same as having it rationed by a government bureaucrat.
     
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  9. What is clear is that one can "want this want that" all day long....

    The question should be....how can the pie get so big....that the rewards from implementation will dwarf the current costs that the govt. faces....

    At the moment....the cart is before the horse....much like a child wishing for Christmas gifts that their parents cannot afford....

    And the child is demanding the toys in the window....regardless of affordability....

    This is wrong.....

    .......................................................................................

    Not to beat a dead horse....

    A 10% state 5% Fed C tax .....no other taxes....is the major part of the answer....and make the US States the actual decision points....get rid of the 2 party lobbyist/fascist system that has proven it does not work.....