Sunday, December 6, 2009

Reading

I try and read some for fun, and for fun I mean things that I don't have to read for work or for school. Invariably the genre's that appeal to me are books on politics/ideas and politicians, sports stuff, and I am a sucker for secret agent type stuff (Bourne/Bond/and most recently W.E.B. Griffin books). But this post isn't about that. I read a passage earlier today I wanted to pass along that really spoke to me, I will copy, its only about 1/2 a page so consider it a teaser:

"The deficit has always been a sideshow. It is the unimportant and uninteresting difference between two important and interesting numbers: how much money the federal government spends and how much it takes by force. The difference between total spending and total taxation is the deficit. It doesn't matter. Total government spending is the amount of money taken from the real economy and spent by the politicians on politically directed rather than consumer directed decisions. It doesn't matter if the money is taken or borrowed.

As a thought experiment, imagine the entire federal budget is one hundred dollars. That one hundred dollars in not available to the private sector. One way to finance the one hundred dollar budget would be to take ninety dollars in taxes and borrow ten dollars. this would result in a ten dollar "deficit".

Suppose the Democrats and the national media demand that we eliminate the ten-dollar deficit by raising taxes. Okay. Now taxes are increased by ten dollars and the one hundred dollar budget is funded by one hundred dollars in taxes. The deficit is zero.

Have we helped the capital markets because the government no longer has to borrow ten dollars? No. The ten dollars is still missing from the private sector. It is taken rather than borrowed.

At the end of the day, total government spending (plus the cost of the federal, state, and local government regulatory burden) is the true cost of government. The deficit is at best a vivid reminder that costs are running ahead of the governments ability or willingness to tax its citizens." - p. 298 - Leave us Alone by Grover Norquist

I had never really thought of it through all the way like this that "the deficit" really is just an imaginary measurement for telling how we are doing economically as a country. It's imaginary b/c they can make the deficit shrink by increasing taxes which does us no good. (By us I mean those who want fiscal responsibility and smaller government.) The thing really is all about spending. We as a country have to cut spending to get out of the hole, the bouncing between increasing the deficit and then lowering it while raising taxes is the proverbial paying peter to rob paul and reversing it a few years later. It is not a solution, just a continuation.

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