Stupid Budget Plan, this Cannot Last

“Power over a man’s subsistence is power over his will” – Alexander Hamilton

Quick note today. I saw this chart over at Mish’s economic blog. It shows transfer payments as a proportion of government revenues, and it speaks volumes:

Now, it doesn’t take a mathematician to see a trend line here – the curve is moving up in time. Sure, it comes down during times of economic growth, but it never really gets down to it’s pre-recession minimum and jumps higher than ever before in the next economic slump.

I’ve said before, and I’m sure I’m not the first, that making a budget plan by first declaring certain expenditures must be made regardless of price and then deciding what else you want to buy is absurd. “We will have a European luxury car, a house at the beach, Cable television, and a weekly massage – these are non-negotiables regardless of price.” This isn’t how any of us do it. We see how much is coming in, and we decide how we would like to appropriate it. If European luxury cars are too expensive right now, then we don’t buy them (note, I drive a Hyudai Elantra and have never owned a European luxury car).

Yet this is exactly how our federal government works. “We will pay these classes of people these amounts of money – these are non-negotiables – then we will decide what to do with the rest (and print more if we need it).” This cannot last. There is no way to get the budget back under control without cutting entitlements – there is no way to do it. Even if you cut all discretionary spending (including the military), eventually this trend will break the bank. (You guys do realize that this is only going to accelerate as Baby-Boomers hit retirement?)

So what will we do? Well, there are two fundamental options. We could cut these entitlements and enrage the masses, or kick the can down the road until the whole system collapses and everybody gets nothing. Either way, these benefits will not exist in the future (perhaps “the future” is 20-30 years off, but it is coming soon enough).

The former has little political advantage for those in power now. Making hard decisions is rarely rewarded in the me-first society.

My tack has been to try and convince people that these types of programs (Medicare, Medicaid, Social Security) are in fact immoral. They presume that the federal government owns the productive capacity of the citizens, and can transfer them as it sees fit. This, of course, is tantamount to slavery – which we say we oppose in this country.

All the cries about “helping the poor and needy” can be easily cast aside – those worried about helping the poor and needy (and we all should be) are free to do so with their own money and their own time (and we all should). This can be accomplished without resorting to slavery.

My point is that the only means of making a political change that has an immediate negative impact to so many people (though a long term benefit to most everybody) is to have a reason beyond personal economics. Winning the moral argument offers people an opportunity to vote against their wallets but for their better nature.

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