It’s astonishing to think that the budget deficit for the fiscal year 2012 is set to exceed $1 trillion for the fourth consecutive year…
As reported by the Treasury Department, “the federal deficit reached $904.2 billion during the first nine months of the budget year.” By the fiscal year’s conclusion on September 30, the Congressional Budget Office anticipates the deficit will rise to approximately $1.17 trillion. This is sheer madness.
It’s important to remember that prior to 2009, the federal government never recorded a deficit exceeding $500 billion, with most years being significantly less. Remarkably, only 12 years ago, the government actually achieved a budget surplus. However, they failed to allocate those excess funds to reduce the national debt.
Since 2009, $1 trillion deficits have become commonplace. This trend seems necessary for maintaining government operations and fulfilling public commitments. We’re constantly warned that any cuts to spending or increases in taxes could derail the economy…
Deficit Spending and Reduction
Keynesian economists, led by figures like Paul Krugman, often cite Greece as a cautionary tale illustrating the repercussions of raising taxes and cutting spending. The economy contracts without ample credit infusion, leading to decreased tax receipts and consequently, an escalating deficit.
Krugman’s point may hold some validity in the short term. Ultimately, however, the primary strategy for reducing the deficit is through cutting spending. Once the economic distortions from stimulus fade, growth is expected to resume and deficits should decline.
The past four years have demonstrated that excessive deficit spending is an inefficient method for stimulating economic growth. The resulting effect is an economy revving in high gear while still mired in first gear—overheating but not truly progressing. Continuing down this path is sure to culminate in a catastrophic failure.
Would it not be wiser to allow an initial cooling period, despite the pain it may cause, to set a sustainable course towards lasting prosperity?
At the Economic Prism, we advocate for a smaller government and prefer spending cuts to tax hikes. But where should cuts be made?
In a spirit of good-natured mischief, and since no one in Washington sought our opinion, we’ll propose a few ideas…
Why Chimpanzees Throw Poop at Zoo Gawkers
First on our list would be eliminating taxpayer funding aimed at uncovering why chimpanzees engage in throwing their feces at onlookers in zoos. As revealed by a $592,527 study funded by the National Institutes of Health in 2011, “chimps proficient at throwing objects displayed superior communication skills compared to those with less adept throwing abilities.” Interesting, to say the least.
Next, we’d suggest a reduction in the $765,828 allocated for pancake subsidies in Washington. We’d also eliminate the $35.38 million spent on summertime gatherings for Congress. Additionally, there should be an end to the $30 million sent to Pakistani mango farmers, the $120 million in benefits distributed to deceased federal employees, $14 million earmarked for Air Force Green Energy projects, and $15.3 million for the notorious “bridge to nowhere” in Alaska… along with many more instances.
On a more serious note, the reality is that the federal debt—now nearing $15.9 trillion and rising—is unlikely to ever be repaid. We seem to be headed toward either default or hyperinflation. Given that 61 percent of all government debt issued by the U.S. Treasury in 2011 was purchased by the Federal Reserve with money created out of thin air, hyperinflation appears to be the more probable outcome.
Historically, the most reliable safeguard against the ravages of hyperinflation has been gold and silver. This principle held true during Roman times and continues to apply today. Owning gold and silver coins serves as the ultimate buffer against financial crises.
Gold and silver coins remain unaffected by the whims of governments and international borders; they cannot be inflated or fabricated from nothing, and they have a long-standing track record of preserving value over time. As we face the impending hyperinflationary fallout and potential systemic collapse, they will emerge as the money of last resort.
Sincerely,
MN Gordon
for Economic Prism
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