Friday, January 29, 2010

Beware Of the "Hair of the Dog" Advice

The Keynesian economists (Paul Krugman) have been begging the Democrats enact even larger spending bills. The liberals are of the mistaken belief that more government spending will revive a stumbling economy. Economics 101 shows that increases government spending can and will stimulate an economy. The problem with the economics 101 theory is that the main assumption is a deficit neutral norm. We have not been a deficit neutral economy for decades. Deficit spending is what got us into the economic dire straits to begin with. Spending more right now will only hasten the impending bankruptcy.

The national deficit is over $12 trillion dollars. As a country we are in way over our head. The deficit is nearly as large as the entire economy. As a country our treasury takes in $2 trillion dollars per year, yet we owe 6 times that amount. An individual that approaches owes 3-4 times their annual income would be perilously close to bankruptcy. Our government is pushing 6 times their annual income and the idiot Keynesian economists are begging for more. The problem is not that our country taxes too little. The problem is our government spends too much.

The liberals and democrats would like people to believe that tax cuts starve the treasury. This is an outright lie and the liberals know it. Reducing taxes actually increased the treasury revenues. In 2007, the year the recession started, our treasury brought in record hauls to the government coffers. The liberals love to say the deficits under Bush were simply because of his "unpaid for tax cuts on the rich". That isn't true because even with the tax cuts Bush enacted the treasury took in records amounts of money. We don't need higher taxes that will stifle investment and hiring. Leave the tax rates alone and bring the financial house in line with what revenues are available.

No one is capable of spending twice as much as we take in year after year. That is what our government is doing and expects us to do even more. In 2009, our government took in receipts of $2.105 trillion dollars, the government spent $3.522 trillion. Next year is on track for similar results. In fact the CBO estimates trillion dollar deficits as far as the eye can see. Over government has placed us in a position we won't ever be able to repair. Lunatics on the left are pushing even harder for more deficit spending.

Our financial house is out of order. The perpetual deficits are crushing the country. Deficit spending is what caused this recession. Yet Obama and the democrats want even more. Americans as individuals owed too much. Whether it was on mortgages, automobiles, or credit cards many Americans were in hoc above their means to ever repay. When the defaults started so did the financial crash. Obama and the democrats love to blame those evil bankers. While I may agree to some extent the bankers helped push us as individuals over the edge, I also believe our "keep up with the Joneses" philosophy buried us in debt. Our government is doing the same thing. We are in over our heads and their are only two ways out. One is to declare bankruptcy and default on the national debt. The other is to reduce spending and reduce it now. Either way American is in for the most painful of times. Better we recognize that now and suffer for our sins today than wait for tomorrow. The pain and suffering will only be worse the longer the deficit spending continues. Beware of the advice from those that suggest "the hair of the dog" remedy, that will only make it worse than it already is.

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