The estimated results are in for 2009′s economic indicators showing that Gross Domestic Product (GDP) declined about 2% overall from 2008. Considering there was a collapse in the financial industry, the bail-out of two of the three major auto manufacturers, as well as abundant pain for the everyday American reflected in the 10% unemployment rate, one is left to wonder: only a 2% decline? Is that all it really was?
The primary reason that the US economy did not have a more serious decline is one that has been enormously unpopular with many people. The Federal Government’s unprecedented $3.6 trillion budget is what kept the US economy from completely sliding into a tailspin in 2009. I was no fan of the budget either, but numbers don’t lie and the fact remains that the single largest reason GDP didn’t decrease by 6-10% in 2009 is because of Federal Government spending. This does not mean that the exorbitant Federal Government Budget was a good idea.
Recall that GDP is made up of four broad categories: consumer spending, government spending, domestic private investment, and the net import/export value. To the left is a table that compares the 2008 and 2009 GDP estimates for the US. If government spending had been held flat to 2008 values and all other components of GDP had the same 2009 values, the economy would have experienced a 7% decline, or more than three times that which it experienced with the increased government budget. In reality, had the government spending remained the same as in 2008 the private investment and consumer spending categories would have been slightly weaker in 2009 than the actual.
Although the high government spending softened the blow to GDP, this is no measure of the intelligence of those expenditures or the true value to society. This is where the argument can be made that GDP is not the appropriate measure for a nation’s economy, as it is certainly not reflective of overall quality of life or the choices made with the production and consumption in the economy. When a government spends more it leads to increasing deficits, especially when the citizens and businesses of the economy are making less and paying less in taxes. The increased outlays are unsustainable because the accumulated deficit accrued from almost a hundred years of deficit spending is enormous and adding to it in such large quantities will only speed the inevitable financial demise of the US government, which ultimately means the economic ruin of all of its citizens. Artificially keeping GDP afloat through vast government budgets is dangerous to our future.
I am a fiscal conservative who believes in smaller government. Unlike our Tea Party colleagues who probably can’t explain to you how our economy works and how the government budget fits into the bigger picture, I am also a realist who understands there are many challenges to be overcome in order to achieve a smaller, less expensive government.
- Federal, state and local governments employ millions of people and cutting the services they provide means cutting their jobs, which increases unemployment
- Private industry is more lean and efficient than government and can most likely provide similar service levels with less people and resources, thereby contributing less to GDP and less jobs into the market
- The largest contributors of our government spending come from entitlements for the elderly or infirm who cannot afford the services they rely upon to live
- The net import/export figure is a large negative contributor to US GDP mostly because of foreign oil, which we show a complete lack of ability and interest in changing
So how do we decrease government spending without thrusting millions of workers into unemployment, millions of elderly into bankruptcy, revoking healthcare from millions of people, and still maintain economic increases? If I knew the answer then I’d be running for office. The system that is currently in place has so many convoluted taxes and methods of appropriation of those taxes that it is very difficult to ascertain an approach to migrate these services to private enterprises. Additionally, do private enterprises even want to provide some of these services?
Education is a great example that is being experimented with today. Over the past decade charter schools have grown in number and popularity. They are essentially private-enterprise schools that look to turn a profit while maintaining adequate levels of education. Many people interested in education and education reform have been watching charter schools’ evolution, some wishing for success and others failure. If they succeed it is a testament to private industry’s ability to take over a traditionally publicly provided service and turn it into a profitable endeavor.
This leads to the question: fundamentally, what should a government provide and what should private industry provide? Here is where the partisan disagreements ultimately stem from in our political culture today. I believe that it is simple: government should provide nothing except for those things that a private enterprise otherwise could not, or would not, be willing to provide the market. Perhaps roadways or other infrastructure, however even these have been slowly attempted by private companies. The military is also no longer strictly a government institution as companies like Blackwater are employed to carry out military functions. Perhaps government need only function as a minute oversight bureau that ensures a certain level of quality and safety provided by these services, and that the Constitution and legislation of our country is properly adhered to and enforced while maintaining the individual rights and freedoms of its people.
Unfortunately you typically run into people, even with differing ideologies, complaining about the same things. One side of the spectrum wants there to be less taxes and smaller government, but as soon as you start taking the trash cans out of the parks, turning off street lights, and not filling police and other public service positions, they whine about losing these services. Those services cost money, and that money comes from taxes. If you want lower taxes then those are the types of measures that will be taken by the taxing authority.
On the other side of the spectrum you have people who want all of the homeless, disabled, infirm, less fortunate provided with all of the things they need in an effort to eliminate poverty and suffering. That is all fine and well, but the amount of money that is required to support all of the services needed to perform these actions in the ways they propose is beyond the ability of the job force to provide without taking nearly 100% of their paychecks. What is the motivation for a person to work at all, let a lone to work harder and have a drive to be exceptional and successful if all that you need to do to have food, healthcare and a roof over your head is be poor and jobless? The resentment that would occur from such a system would backlash into a downward spiral where less and less people would work, contributing less taxes, thereby increasing the tax rates on those who do work to continue providing ballooning service costs for these people.
Where does this leave us? Tea Party advocates who say that conservative principles and smaller government are the answer more often than not have no idea what it would mean or how to go about reducing the size of their government. And conservative principles have nothing to do with it. Liberal agendas want to take on every perceived evil in the world so all citizens feel like they are wrapped in a warm, cozy blanket and no evil or hardship exists. Well, it does, and people need to work in order to enjoy the benefits of shelter, food and medical care. These things are not rights, they are privileges of those who give back to their society.
Image Credit
Saving is for wimps! I have a plan for affordable housing image courtesy of Flickr user woodleywonderworks under the CC license
3 Comments
High marks for common sense. That means you’re not going to make many friends with this article.
I think an often overlooked and manipulated issue is illegal immigration. There are over 20 million people in this country working, using government servics, but not contributing to tax revenue that funds those services. At the same time, we are spending ridiculous sums of money on INS and Border Patrol.
So I propose that we collect those revenues and at the same time make people (illegals) want to pay them.
If you can
1. Show a pay stub
2. Are willing to pay taxes
3. Have never been convicted of a felony
then you deserve a chance in the US. So why not drastically reduce the size of anti-imigration departments and allow hard working imigrants (like the ones who built this country) to stay provided they perform their basic civic duty? That translates into a net gain of billions of dollars for the government and puts to bed a hot topic of debate.
Yeah, sure, the illegal issue I agree with you one. But Social Security, Medicare and Medicaid represent almost $2 trillion of the government budget. You want to move government budgets, you need to do away with or drastically alter these services. Anything other than that is purely for show and makes no real difference.