The 2003 Spending Orgy
Federal tax revenues have dropped dramatically since the stock market peaks of 2000. Rising unemployment continues to reduce the number of taxpayers, while plummeting investor portfolios no longer produce the huge capital gains and dividend revenues that flooded federal coffers in the 1990s. This drop in revenues was of course predictable, given the faltering economy and enormous market losses of the past two years.
Yet has Congress responded to this new reality with spending freezes or other austerity measures? Hardly. Its response has been exactly opposite, passing a 2003 budget that is a whopping 22% higher than just two years ago! Not only is spending way up in terms of total dollars, but the rate at which spending grows each year is accelerating rapidly. In fact, a federal budget that once took a century to double in size will now do so in only about five years. This rate of growth cannot be sustained unless Congress truly intends to bankrupt the federal government.
This practice is akin to getting a pay cut at work, then immediately buying a bigger house with a higher mortgage payment. No sensible individual would spend more when his income drops, but Congress operates without any shred of common sense or restraint at budget time. When members of Congress consider the various spending bills, the money- hundreds of billions of dollars- hardly seems real. What’s another 10 million dollars, they reason, for a pet project or favor to a lobbyist? Unlike a family facing the loss of income, Congress can raise taxes, borrow from foreign governments, or spend money newly printed by the Federal Reserve. Spending cuts are simply not considered. In fact, the federal budget grows every year without exception, and the previous year’s spending is treated only as a baseline. How long could your family survive if it spent five or ten percent more money each and every year?
One might assume the 2003 spending increases are largely the result of September 11th and homeland security concerns, but actually it’s the standard types of federal pork that drive the overall spending surge. Virtually all federal agencies and federal programs, including those that have nothing to do with defense or terrorism, have enjoyed budget increases of more than 20% over the last two years.
Meanwhile, Federal Reserve Chairman Greenspan recently suggested before a congressional committee that billions could be saved if the Treasury used lower inflation estimates. In other words, if we say inflation is lower than the Consumer Price Index and other barometers indicate, Congress won’t have to spend as much on cost-of-living adjustments for programs like Social Security. This amounts to lying to the American people about our monetary policies, by hiding the true rate of inflation caused by printing too many dollars and keeping interest rates artificially low.
The looming hangover is reflected in the federal debt, which is officially about 5.6 trillion dollars. The real figure is much higher, because the official figure does not include outstanding future liabilities like Social Security and Medicare that millions of Baby Boomers will soon demand. The “debt limit,” created by federal law in a hopeful attempt to limit congressional spending, is routinely raised by Congress without political fallout. All Americans must become aware of how truly unrestrained federal spending has become, and realize that voters represent the last line of defense against the complete bankruptcy of the U.S. government.