Why the Budgetary Game Is a Big Taxpayer Scam
by Larry KudlowHere’s some friendly fiscal advice: Any time some Washington big shot like Ben Bernanke or Tim Geithner claims that immediate spending cuts in the debt deal will harm the economy—ignore them. Completely. You know why? Because in this great country of ours, spending never goes down. Never.
Take a look at the following chart:
The blue line you see is President Obama’s budget. The green line is Congressman Paul Ryan’s budget.
Now, Paul Ryan’s is of course a couple of trillion dollars lower than Obama’s over the next ten years. But what do they both have in common? They both go up. As in spending more, not less. As in, roughly $40-45 trillion dollars more. That’s a whole lot of taxpayer money, folks.
Now why is this? It’s because of something called the “current services baseline” which includes population and inflation increases built into the budget. Entitlements have their own formulas.
So when you hear a politician tell you they’re cutting spending, they’re actually referring only to reducing the growth of spending. Rarely, if ever, do they actually reduce the level of spending.
Think of it this way: You’re out car shopping and thinking about buying a $100,000 Mercedes. That’s your target. But then you decide to forego the Mercedes and opt for a $20,000 Chevy instead. Well, guess what? Congress would score that as an $80,000 budget cut. Huh? We all know that it’s actually a $20,000 budget increase.
Let’s be honest here. This budgetary game remains one big taxpayer scam. Look, I used to work in the federal budget office. I know the game.
Here’s yet another scam: big budget deals say they “cut” (there’s that word again) a couple of trillion dollars over ten years. But most of it is targeted for the last couple of years, as in years eight, nine, and ten. So basically it’ll never happen. It’s four or five congresses from now. Laws change. Deals are broken.
At the end of the day, the only thing that really matters is next year’s budget. Will it be cut? Ever in my lifetime? Because if it were cut, it would bring that line in that chart above down. Now that would be a called a decline. All of that other stuff? Increases.
When business cut expenses, the spending line declines. But when government cuts spending, the spending line always rises. Think of it.
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51 Comments
A ten year plan (plug in a number here) will accomplish absolutely,….
nothing in the way of spending control.
It will however, provide a ten year cover for politicians to devise,…….
new "Community Redevelopment" type acts.
Future spending cuts never happen. They didn't under Reagan and they won't now. Republicans can make their little deal for cuts over ten years and then come back and try to sell it to us like a used car salesman, but they DO NOT HAPPEN.
All we need now is a few more American citizen's to actually pay attention to all of this and then care to voice their opinion……. oh, are they taking auditions for another American Idle?……..
Are the TEA Party numbers great enough to continue this march towards fiscal responsibility out of our politicians?…. I sure hope so.
How about disbanding the DUPLICATE wasteful GOVT AGENCIES that were revealed!? Huh? WHEN WILL THAT LIST be published Mr. President?
Oh, and I agree with Ralph. NO LONG TERM CUTS OVER YEARS. We are living in the here and now!
CUT THE SIZE OF Government down to a THIRD. Then I'll believe that we're making progress. Stop ignoring these duplicate Govt Agencies and Thousands & Thousands of Govt Regulations that cost US all of our Tax dollars, and our Freedoms!
Start the prosecutions of the twin tyrants that are obsessed with 'Fundamentally Transforming America' into oppressive Globalism.
IF there is an election in 2012, a Constitutional Conservative POTUS must be elected. It will be up to us to make viral the daily barrage of country killing Executive Orders, Bills and Laws this POS POTUS does, Lord knows we won't have any help from the media.
It's up to us, there is nobody who will help us anymore.
If that much spending happens, it just shows that we have passed from a Democratic Republic to a Socialist Democracy. Has a historian/political Scientist (of the non-progressive/Socialist Leanings) I am shocked at reading how our so-called Conservative representatives are aiding in forging our chains to be slaves on the Federal Plantation. ;0(
Thank you Larry.
The bottom line is, spending will NEVER decrease.
Never, ever.
If we are borrowing .47 cents of every dollar we spend at the federal level currently, and mind you we are doing nothing that would in any way provoke growth in our economy, what happens when we go to .60 cents of every dollar? How about .75 . . . because so long as we print money and have zero restraint in spending that is exactly what is going to happen.
I call this "the I'll be dead any way syndrome." It takes over in people who have carried themselves in a manner inconsistent with common sense or basic financial sense. They think they can continue to roll the dice because the clock for them is almost up. Well, most of us here have children, we want them and their future children to have a better life then we had. The only way we can do that is to vote out Obama and as many Democrats as possible in 17 months – it will be our last chance.
And when said politician says 'we can't cut spending' they are lying also. This is politician speak for 'we won't'.
This has been Washington speak for decades, dutifully reinforced by the lapdogs in MSM. This must change, if we are to save our Republic. Either we rein in spending voluntarily, or we rein in spending via collapse…choose.
Excellent article by Mr. Kudlow. Budget cuts are nothing but political double talk and politicians want nothing to do with actually shrinking the government, which is pretty much a necessity unless you want to raise debt. And like the article points out about Geithner's and Bernenke's claims are nothing but lies. The best thing a government can do to grow its economy is to limit government size, limit government restrictions and regulations and limit taxes.
Very true, pnipni. Not only disbanding duplicative agencies, but caps on agency spendind need to be enacted. The Department of Energy, Education and Housing and Urban Development need to be abolished. Government needs to review and revoke regulations that stifle business and lower the corporate tax to stimulate spending. Make this country business friendly grows the economic pie for everone. The government will receive increased revenues. Corporations will expand and hire more people. The government needs to get people to work that have the ability to work and off welfare. That cuts costs. One could still help with food stamps, but a least people would be working, earning money from a private business, not getting a government handout.
Joe,
I'll ask the obvious.
What happens when we are leveraged to the point, that we are borrowing $1.25 of every dollar…………………?
Were F&*cked . . . we may be now. But they are not going to tell us.
Well go fetch a tube of KY Jelly and a case of whiskey.
We might as well lay back and enjoy it.
We sure as hell can't stop it.
The biggest problem I see with all these "10 year plans" is this: future Congresses aren't bound to the current Congress' decisions. At all.
We need a balanced budget amendment to the Constitution. It is the only way to hold future Congress critters accountable to harsh budgeting decisions that need to be made.
Rush Limbaugh and others have been explaining this for years.
Tried this line of reasoning on my wife when I wanted a brand new pickup truck; she didn't buy it, nor did I. I didn't get the truck.
I will never let Barney Frank and his minions to get me!
So basically, we need:
1. To conduct our accounting honestly, the way businesses have to
2. Spend less than we take in each year so as to reduce the deficit (the sooner, the better)
Sounds good to me Wesley. I hope that we see that in practice soon.
Umm, whats wrong with spending increasing proportionately with GDP…. makes sense to me.
Why is spending so bad haha. I hear a lot about how its so out of control, yet I rarely ever hear an explanation as to why spending money is bad.
Larry:
Here's the part you're not talking about. When you have a president or a governor that doesn't want to cut spending you can't make any progress. First you need a president who is serious about cutting the budget. Obama gives multiple speeches on taking back a tax break for corporate jets. Okay I heard that break is $3 billion. Even if we grant that what are you doing to reduce the $16 trillion plus in deficit spending over the next ten years.
Walter Hanson
Minneapolis, MN
We could use some more there Stan,..
Learn economics. Under Obama, spending as a portion of GDP has skyrocketed.
Deficit spending is bad because it gives more power to the Gov at the expense of indivuduals, the spending is usually on unconstituional, redistibution schemes. It necessitates future tax increases. It encourages inflationary fiscal policy so those of us who save, see our wealth evaporate.
Plus spending other peoples money is morally wrong.
This article is a great argument for the Balanced budget ammendment (all 47 Republican Senators support this–RINOS and all!)
We must constrain the thieves who rule over us. Need to keep their balls in a tight vise.
So when the government paves a road, that is morally wrong?
Come on quit pulling our leg
"…..as to why spending money is bad……"
you can NOT be that simple, but just in case you are,….
first, nobody says that spending money is "bad",…….
spending somebody else's money can be "bad', but,…..
when you spend someone else's money foolishly,..
that is a tad 'bad".
And if you spend someone else's money foolishly as well the money,…….
of their children and grandchildren,……..
now that's very, very,…… "bad'.
DUUUH,…!!!!
Just goes to show MONEY HAS NO VALUE. Invest in the printing press industry. Wait that does not work either, it is all digital money now. I guess it is time to buy a farm along with a couple strong horses and some mules to plow through this one. Go Green
Wow. You are more far gone than i thought. No, paving roads is not morally wrong and i never heard a single person claim it was. That's your arrogant way of mocking all moral claims. We all benefit from the road system, just as we all benefit from national defense, and a police force.
But spending trillions so that everyone get's world class health care hurts some very badly while helping others. Ditto for GM bailout, Wall st. bailouts, farm subsidies, food stamps, public unions, and the entire federal bureaucracy .
Safety net, yes. An entire class of the society living off the hard work of others…that's socialism, which is another name for tyranny. And that's morally wrong!
Unless programs and whole bureauocracies are eliminated, the laws, regulations and institutional apparatus for continued fleecing of the productive for redistribution to the unproductive will remain. Dismantling Leviathan cannot be just about cutting spending…it must reduce the scope of decision-making (power) government has at all levels of our federal system.
Ryan's plan is a good start, but it needs to followed up by pruning – drastic pruning. The government has way too many alphabets. I'll bet it doesn't need anymore than 26 letters if that many to spread out among it's agencies. Make it a puzzle. The government can only use each letter of the alphabet once for the sum total of its agencies. All other agencies that can't find a letter must be disbanded.
Socialism is not the same thing is tyranny. Get a dictionary.
So you're going to add some qualifiers to your statement that spending others' money is morally wrong huh?
So you're saying its more complicated huh? Hmmm. Welcome to reality my friend. It is complicated. Reasonable people can disagree.
Roads benefit everyone? What if its a road built far away from me? What if I don't have a car?
Healthy people benefit everyone is some ways. It gets pretty subjective. See?
The greatest spender in the history of our nation is now on Capitol Hill railing on GOP leadership and demanding the House and Senate hammer out a budget deal.
Never-mind that it was Obama who hailed the stimulus as a success in creating jobs only to find out later that the government spent nearly $280,000 for every job created!
Now, he's stomping around on Capitol Hill saying, "we've got a unique opportunity to do something big, to tackle our nations deficit in a way that forces government to live within its means." Hussein is insane!
"The basis of our political system is the right of the people to make and to alter their constitutions of government." George Washington
Gentle Readers,
Dear Mr. Kudlow,
Thank you, Sir!
Sincerely,
John C Lepant Brighton CO
Everything you stated is spot on! I wish they had half of your wisdom.
Until the money is cut off. ;0)
Comrade Obama's credo is, if you have to lie, lie BIG! And he always has to lie.
As you said, the greatest SPENDER in the history of our nation is railing on the GOP to fix the problem he created…by some means other than SPENDING.
As always, his lies are stunning in breadth. The Audacity of Lies.
Spending money is necessary, but let me ask you how you feel about the following ways in which your government spends the money you and I make.
1. $25 billion was lost in "unreconciled transactions".
2. $100 million in unused commercial airline tickets bought by the DOD.
3. $6 million or so in fraudulent credit card purchases by federal employees.
4. $30 billion or so in Medicare overcharge payments.
Does any of this bother you?
Spending money on public improvements is not always a bad thing. Unless it is a Bridge to Nowhere or on government buildings that they don't even use any longer.
I have a problem with taking money from those that work hard and giving it to those that just sit around and wait for the next handout. You don't?
Never mind the bogus Ryan plan. I don't trust any 5 year or 10 year plans. Congress always ends up changing them so they become meaningless. Let's see some meaningful cut in this year's budget.
I think we're basically in agreement here.
I'm just against this trend of decrying all government spending as bad. Of course wasteful spending is bad.
Giving money to those less fortunate could be seen as giving handouts, but some people slip through the crack in our society, and in a country as rich as ours we have the moral obligation to help people out.
Some people maybe simply gaming the system, others are genuinely helped. Its difficult to tell the difference.
This is why I don't get why people were so gung-ho over the Paul Ryan plan. It spends more than now, and it spends a higher % of GDP than Bill Clinton did. And then when someone pointed that out, they'd get smacked about it as if it was some personal attack on Paul Ryan or something.
The problem is that spending per capita increases, so it is not proportional to population or GDP growth. The gross of total spending will always increase, and there's nothing wrong with that. If it grows at the per capita level then it's a problem, especially when the government is operating with deficits.
A Democrat I know told me to think about it as we do with our judicial system. Some criminals get away with crimes because of our due process and standards of proof, but it's worth it to avoid imprisoning innocent people. With social welfare, there exists some acceptable level of fraud/abuse in order to help people genuinely in need (working off the reasonable assumption that fraud/abuse is inevitable). Or so goes the argument.
I still believe in Ryan's plan. It is a step in the right direction, but even more needs to be done.
Me too. I know that he took heat, but he's courageous and a smart economist. We can just do corrections and editions Wes.
Good job. Nice list. It may be lost on Kenyan12 the troll though. He needs to watch the vid of Mario Vargas Llosa until he sees the fallacy and non- viability of Socialism.
Llosa said it best: Socialist Utopias sound impressive but are really brutal, criminal, full of discrimination, exclusion and State intervention and intrusion into the economy! If Kenyan12 ever gets that, then he will understand your points.
Yes until we starve the fed of money.
I wish Ryan would run for the republican nomination for President Rubio or West could be the VP nominee.
if kenyan wants socialism i suggest kenyan MOVE TO A SOCIALIST COUNTRY.. . . and dont come back if you get a medical condition that only can be serviced in the US (for now).!!!!!!!!!!!!!!!!!!
some people only repeat what msnbc and their ilk say.
this makes you a sorosian, kenyan. . . MOVE OUT
We now have a healthcare reform law. If you don't like it, move to another country.
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