America is gripped with numerous problems induced by Biden and Co.: New Middle East wars; gas shortages; overrun borders, and; displaced pipeline workers, to name a few. But right up front remains the specter of government spending, out-of-control debt, and rising inflation.
Much like millions of American families who gather at their kitchen tables to consider money and budget issues, America desperately needs a national, honest, and relevant discourse of how our politicians are managing our taxpayer budget and spending, and national debt.
At the American family level, of course, spending more than you bring home is cause for grave concern. Upon the first signs of trouble, ordinary people must adjust or face ever-growing severe economic troubles. Why shouldn’t the same sober, honest economic review apply to our federal, state, and local government spending?
After all, governments don’t actually produce the revenue they spend. They take that productivity from real Americans, off real kitchen tables. And that fact has profound consequences for the American family and our economic future.
For instance, the recent Biden $1.9 trillion bailout spending bill will cost the average family of four in America almost $15,000. That’s right, the $1,400 per family “Covid Relief” check from Uncle Sam will cost you $13,600 in higher taxes and more debt. Meanwhile, we pay the unemployed more to stay home than return to vital small businesses and the productive sector.
And while we’re at it, let’s put pencil to paper on our actual national debt. Currently, the U.S. is running a federal arrears of over $28.3 trillion. It was just one-tenth that — $2.8 trillion — when Ronald Reagan left the presidency in 1989.
Compared to Cold War era 1960, when the debt stood at 52.9% of GDP, and the 1980 low of 34.5%, we are currently borrowing at a breakneck 127.8% of our total national productivity. But again, because the government doesn’t produce anything, that federal debt rests on the head of each and every American. Today, it’s $85,000 per American, and $225,500 for each taxpayer: a staggering $340,000 for the average family of four. And there’s more.
In addition to the massive federal debt, we are also swamped with state and local deficit obligations of a combined $3.35 trillion, which brings the total government debt for the nation to a shocking $31.7 trillion, or 147% of our GDP.
When you and I spend more than we bring home, we have only two ways to manage that conundrum: We can reduce our spending, or we can find a second job to earn more income. Often, it’s a combination of both.
But with the Biden team, it’s “just spend, baby” and let the economic consequences take their toll. In this way, our electeds can satisfy their budget-busting interests while avoiding the unhappiness that tax increases provoke in the masses. But how long can this deficit spending and debt overload last?
Not for much longer, it appears. Recent indications are pointing to a danger on the economic horizon: the dreaded inflation Kraken has resurfaced. For the first time in over a decade inflation is now increasing at 4.1% year-over-year and shows no signs of abatement.
That’s a “red sky at night” for America. Inflation is nature’s way of adjusting for reckless budgeting choices and it is a cruel storm. It’s severely regressive and hits the working poor hardest. Kitchen tables are wrecked. Food, energy, and gasoline costs jumps are most keenly felt for everyday Americans.
So while American families desperately try to keep within their means, government’s reckless budget habits put devastating pressures on everyday productive Americans. It’s time we apply the same fiscal rigors of the family budget to all levels of government, asking the same tough questions that we face at the family table. Then, we simply need to identify where government we can be gutted. If it can be handled by the private sector, then it has no business in a government budget, to start.
Currently, spending at all levels of government is at a gargantuan $10.2 trillion or nearly 46% of GDP, not to mention the cost of complying with all government regulations. That cannot be sustained. Nobel Prize-wining economist Paul Romer and his “Rule of 72” provided an optimum rate of spending to be somewhere around 20% of GDP in order to provide healthy economic growth for our economy. We have a long way to go on our national budget to achieve that goal.
Applying the “Right Size of Government” is the first order to return to sound fiscal health and relieve the pressures on the most important spending plans: American’s kitchen table budgets.
Lew Uhler is founder and chairman of the National Tax Limitation Committee and the National Tax Limitation Foundation (NTLF). Uhler was a contemporary and collaborator with Ronald Reagan and Milton Friedman in California and across the country.
Peter Ferrara served as a member of the White House Office of Policy Development under President Reagan, Associate Deputy Attorney General of the United States under President George H.W. Bush, and the Dunn Liberty Fellow in Economics at the King’s College in New York.
Joe Yocca is NTLF’s policy director. A long-time political and policy consultant, Joe served in the California State Senate as chief of staff to the Republican leadership for decades, and directed numerous statewide legislative and congressional campaigns throughout his career.