Latest posts by Lennie Jarratt and Chris Talgo (see all)
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The federal government has a spending problem, not a revenue problem. In 2016, the feds collected a gargantuan $3.7 trillion in taxes. This staggering amount of revenue, the most ever collected in one year, did not come remotely close to covering federal spending. Congress managed to run a deficit of $666 billion, as annual spending ballooned to a mind-boggling $3.9 trillion.
The nation is careening toward a financial catastrophe, and the reckless course the federal government has embarked upon will be rife with economic suffering and social upheaval. To avoid this devastating scenario, Congress must change its ways.
Freezing spending at current levels until the economy grows large enough to balance the budget is the simplest solution to the federal government’s profligate spending. Families and businesses across America live within their means. They plan for long-term expenses and pay down debt. Why can’t the federal government also function with these basic economic principles in mind?
To stop the federal government’s spending practices, Congress must end its use of accounting gimmicks. Baseline budgeting and intergovernmental transfer payments are just a few examples of the financial shenanigans perpetuated by federal lawmakers.
Another tactic Congress uses to preserve the spending status quo is the use of fiscal rhetoric that misleads the American people. Congress primarily utilizes two false narratives to implement its overspending ruse: “spending cuts” and “tax cuts.” Congress has redefined these terms in ways most Americans are completely unaware of, upending the national discourse surrounding government spending.
Under Congress’ definition, a “spending cut” is not an actual decrease in spending, but rather a decrease in the growth of spending. For example, if a government agency’s 2017 budget was $100 billion and its “projected” budget for 2018 is $110 billion, that agency’s budget is set to increase by $10 billion.
However, if that agency’s projected budget is lowered by lawmakers to $105 billion in 2018, that decision is frequently classified by some lawmakers and the left-wing media as a $5 billion “spending cut.” Only in Washington, D.C.’s muddy swamp could an agency’s spending increase be considered a cut!
This ploy makes it extremely difficult to keep spending from increasing, because any reductions to projected spending are considered “cuts,” and cuts are frequently used to scare Americans dependent on government into believing their benefits will be greatly reduced.
Fiscal tricks like this one can be prevented, however. One solution is for Congress to adopt zero-based budgeting. Under this model, all expenses are analyzed from scratch every year, so nothing is assumed to be necessary. This allows budgets to be crafted irrespective of what has been done in the past. Instead of starting with the previous year’s budget as its base, Congress would start with a “zero base” approach. Adopting this simple plan would increase efficiency and reduce waste, fraud, and corruption throughout the federal government.
The language Congress uses when referring to tax cuts must also change. According to Congress, tax cuts are classified as “expenditures.” Categorizing tax cuts as an “expense” reinforces the false belief people’s income rightfully belongs to the government, rather than to those who actually earn the money. The truth is, tax cuts are not “expenses” imposed on the federal budget; they simply allow people to keep more of their wages and investment income.
Recent history suggests Americans are very receptive to a simple economic message outlining common sense philosophies. In 1994, voters overwhelmingly supported the Republican Party’s “Contract with America,” an agenda that called for spending reductions, tax cuts, and a balanced budget amendment, among other policies.
In 2010, the Tea Party movement gained national prominence promoting similar policies. Six years later, Donald Trump campaigned for president on an economic platform built on tax reform and shrinking the size of government. Voters flocked to this message, and elected a businessman with practically no political experience to the nation’s highest office.
Voters’ support of pro-growth policies has paid off. During the first year of the Trump administration, free-market economic policies have caused the economy to boom. Regulations have been cut at an unprecedented rate, creating a more business-friendly environment. Some federal agencies’ budgets have been reduced, and tax cuts have been passed.
As a result, the stock market has skyrocketed, reaching multiple all-time highs, and gross domestic product is growing at a healthy rate of 3.2%, which is a massive improvement compared to what occurred during the Obama administration.
Members of Congress and bureaucrats in the federal government should stop playing manipulative word games intended to deceive the public into believing they are better off with high-tax, economic redistributionist policies. As the Trump administration has already shown, when families and businesses are able to keep more of their own money and are forced to deal with fewer unnecessary regulatory burdens, everyone wins.
[Originally Published at Investor’s Business Daily]