While most Americans were making their final preparations for Christmas and New Year’s Day, the two major parties were making plans to spend even more of the taxpayers’ money. In a rare example of bipartisanship, the two parties agreed to fund each party’s pet projects.
At the end of the Obama administration, our federal debt had reached $20 trillion. Double what all previous administrations had accumulated. It has now reached $23 trillion. Is this because of the Trump tax cuts? No, tax receipts have actually been basically unchanged. It’s because both the Democrats and Republicans continue to waste the taxpayers’ money in myriad ways.
Why have tax cuts not led to reduced tax receipts? It’s because the income tax rates are still well above “optimal levels.” Higher marginal income tax rates discourage further efforts by the most productive members of society and reduce the gross domestic product. Dr. James Mirrlees proved this in 1971, and he received the Nobel Prize in Economics for this insight in 1996. The European nanny states came to realize this decades ago, which is why they all use a Value Added Tax to support their spending. For those who haven’t travelled to Europe, this is a 20% sales tax.
I well remember the runaway inflation that began during the Carter administration and the high interest rates that were used to control it. I and many of my contemporaries don’t understand how interest rates have stayed so low for as long as they have. If they do increase to historical levels, the federal budget will literally explode.
What could be done to control this problem? Well, we could institute a Value Added Tax. The Economist magazine recommends that we do this. However, not many elected officials would agree.
Could we cut federal spending? I believe that we could. During World War II, America had 12 million men in the armed forces. Of that, 73% were stationed overseas for an average of 16 months, but millions were on American bases at any one time. We will never fight another war with that many soldiers, but we still have most of those bases.
The pentagon would like to close 20% of our current bases, but each base has a congressman and two senators. We continue to maintain bases in countries like Germany and Japan that spend far less than 2% of their gross domestic product on their own defense. Why can they not provide for their own defense? The average farmer receiving an agricultural subsidy has an annual income of $350,000, and a net worth of $3.5 million. Why are we making any subsidy payments at all? We have wasted another trillion dollars or so on the War on Drugs, criminalizing transactions between consenting adults.
Senator Rand Paul has compiled a few programs that seem particularly wasteful: $48 billion in improper Medicare spending, $2 million dollars to improve television programming in Moldava — wherever that is — $1.2 million to study online dating habits, $20 million to teach Lao to Laotians, $22 million to raise the standards of cheese produced in Serbia, $16 million to improve schools in Egypt.
The Republican party seems content to continue this level of spending indefinitely. The Democratic party seems to believe that we are not going bankrupt fast enough, if I understand the presidential nomination debates.
I believe that all of this spending could be ended with no damage to the general welfare, and much more besides.