The question is, "How long can that great fiction continue?"
For too long Washington has told us that we can live at the expense of future generations -- that we merely "owe it to ourselves." But if the current crisis has taught us anything it is that our decisions have long-term implications and we cannot continue to ignore economic reality. Yes, we owe it to ourselves. But we also owe it to our children. We owe it to them to begin restoring some fiscal sense to Washington so that they are not burdened with our massive debt.
Balancing the budget is no longer an academic question but an economic imperative. We are drowning in a sea of debt and the repercussions will come sooner rather than later.
I do not believe the debt will simply burden future generations. I believe we will begin to pay for it in the next few years through significant inflation. If we continue along our current course we may see 1979-style inflation, 15-20% or more. Imagine the turmoil when a fourth of one's savings is lost in a year or a fourth of one's income is lost. Imagine what happens to citizens on fixed incomes.
For every dollar that the government spends, it must tax a dollar from the real economy. This means that we can either have government spending or economic growth; there's no way to skirt around this economic fact. And just as it is irresponsible for an individual to spend more than he takes in, so too is it irresponsible for the federal government. Balancing the budget is so important because it forces Washington and the current administration to contend with fiscal reality.
But the federal government does not like to deal with reality. It likes to operate in a fantasyland where money grows on trees and deficits don't matter. But deficits do matter because at some point we have to pay the piper.
We pay for government in three ways: direct taxation, borrowing, and printing money.
The first is the most visible. When the government taxes it takes money from entrepreneurs, capitalists, and businessmen and gives it to government contractors, politicians, and bureaucrats. The more money in the hands of politicians, the less money in the hands of people who actually contribute to society. It's that simple.
The second way the government finances itself is through borrowing. While many Americans buy government bonds, much of our debt is held by foreign governments. This creates a dangerous situation where our government makes policy based on what's in the best interest of foreign governments and not our own. While free trade is essential to global and American prosperity, government manipulation of currencies is not.
But the final, most pernicious way government tries to evade economic reality is through the printing press. Our Federal Reserve System, the unaccountable, semi-private institution that controls our nation's money supply essentially has the power to create money and credit out of thin air. Basic economic principle states that the greater the quantity of any good (including money itself) the less valuable that good is. The more money the Fed creates, the less each dollar in your pocket can buy. So while you aren't taxed directly, your money can buy less and therefore your real income goes down.
This is one of the major ways Washington has managed to pay for its welfare and warfare -- through the printing press. Because people don't directly see the consequences of printing money, it is especially popular for the politician. Thus it is all the more important for Americans to know about the Fed, which is why I fully support legislation auditing this institution and making it accountable to the American people.
The Republicans have lost a lot of their credibility because they have campaigned on balanced budgets, but once they get to Washington they spend like Democrats. This is why we have been losing elections.
While I was campaigning around the country for my father the real story was not who won the Republican primaries, but how small they were. People are fed up with politicians who behave irresponsibly and renege on their campaign promises. Instead of pledging to balance the budget in ten or fifteen years, Republicans need to cut spending now. The longer we wait and the more interest accrues on the national debt, the harder it will be to make the cuts down the line.
Throughout the following months, I hope to talk to the American people about the importance of fiscal responsibility. President Obama has told the country it needs to cut back in order to get out of this recession. I say that Washington needs to cut back. Washington needs to get its own house in order before telling us how to run ours.
Thirty-two states require that their legislatures and governors pass balanced budgets. When they try to pass the buck on to the next generation, they get massive problems like they are facing in California.
Congress, too, has at various times passed a Balanced Budget Amendment. The Senate passed one in 1982 and the House in 1995. Thirty-two state legislatures passed a Balanced Budget amendment to the Constitution, two states short of what would be required to call a Constitutional Convention. Never quite enough resolve to force government to stop the deficits.
Republicans have, on occasion, been good at cutting taxes, but have never even attempted to cut spending. We must cut across the board. And not just the "easy" cuts.
Republicans like to blame the "welfare queen" for the deficit. Democrats like to blame it all on military spending. The truth is you can never balance the budget unless every facet of the budget is reassessed and pruned.
Whenever these sorts of arguments are brought up our politicians try to scare us into thinking the world will end if we cut spending. Here's a little thought experiment: if we simply used the 2002 budget for 2009 we would not be running a deficit. We would still be spending $2.2 trillion dollars and taking in roughly the same. Certainly, civilization would not crumble with a federal government of such magnitude!
I hope to make this issue a focal point of my campaign as it speaks to the heart of what I believe America can be. A true politician will lead by example -- he or she will make the tough choices. I say let's focus the debate on a balanced budget.
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