PrintApril 28, 2011
The Deficit: Lead, Follow, or Get out of the Way!
The entire budget debate on Capitol Hill and at the White House is a charade. To put the $61 Billion dollar budget cuts in perspective, consider that we could save $38 Billion alone by putting the entire federal budget of $3.8 Trillion on a credit card. The 1% cash back on the credit card gets us most of the way there! This entire discussion is absurd.
What the White House and Congress do not understand is that if they do not get this one right, 2012 will be a tsunami of a wave election. Our unemployment numbers will swell by the legions of politicians voted out of office.
Our citizens know this debate on the deficit is insanity but apparently only a few in Washington get it.
It is now time for the White House and all 535 members of the legislative branch to either lead, follow, or get the hell out of the way.
While our Constitution delegates the budget to the House of Representatives in Article 1, Section 9, Clause 7, true power to set and define budgets rests with those that hold a nation's debt.
Congress has surrendered its Constitutional responsibilities by placing our nation in great peril with unrelenting spending.
The projected budget deficit for 2011 is $1.6 Trillion! The federal deficit is over $14 Trillion. This is not funny any longer, not that it ever was.
Where are the economists in this debate? Where were the economists in 1999 when financial analysts were saying "earnings no longer matter, we are in a new economy"? Where were the CPA's (I am one) in 2005 when Fannie Mae and Freddie Mac joined with Wall Street to create the scam known as the housing bubble? Where was the education system in this country when economic nonsense was treated as economic fact?
Reality is reality. You cannot legislate your way into fiscal responsibility. Keynesian economics espouses that governments can balance economic cycles better than the free market. His theory came out in 1936 at the height of the Depression.
The economic theory for the coming depression will be the Ryan economics which holds, "spending just for the sake of spending is not stimulating to an economy."
Spending does not stimulate when debt is excessive. The very fiscal policy which gave the false impression that the economy can be manipulated by the government is going to be cause of the greatest fiscal implosion in history.
When businesses fix prices we call it anti-trust. When government fixes interest rates in some misguided effort to stimulate the economy we call it monetary policy.
When governments spend to manipulate an economy, unintended consequences surface such as growth in entitlement programs, unrestrained growth in government programs, and reallocation of funds from future generations to the current generation.
Let's face it, price fixing is price fixing. Just because it is government doing it does not mean that it is logical or will be effective.
As someone who has spent time in seven different nations in my life that have undergone rapid and dramatic change, I can assure you that government has no major fix that the consumer and business do not have. The difference is that the free market system is at least rational. Government spending is legislated.
To effectively resolve the current debacle, Congress must stand firm.
The deficit ceiling must not be increased. Not increasing the debt ceiling is not enough though. Our nation must reduce spending.
Spending reductions must be done across the board.
Government must get out of areas not specifically delegated to the federal government by the Constitution.
We must become energy independent. Exporting dollars and related tax revenues to the Middle East makes no sense. In addition to the economic risk, energy dependence also poses a national security risk.
We must develop a meaningful program to reduce regulatory compliance costs. In addition to the drain on our economy, the compliance costs merely encourage employers to export jobs.
We must develop a sound health care policy. Health insurance is not health care. Health care reform is critical to our society to give our citizens the opportunity to live a healthy and prosperous life. Repeal ObamaCare and enact real reform be seeking guidance and expertise from medical providers and not lawyers.
Financial regulations must be reformed to place our government on the same financial reporting and discipline required under accounting conventions and SEC guidelines for corporations. This means that government must be held to the same standards for financial reporting as corporations and not-for-profit organizations.
The Federal Reserve must be subjected to audit and provide Congress with a clear sense of its financial risk.
This nation must adopt financial self-discipline before it is subjected to financial discipline by those who hold our debt. Cosmetic budget cuts will not solve our nation's debt woes. Real change is required to right our county.
Frank Ryan, CPA specializes in corporate restructuring and lectures on ethics for the state CPA societies. Frank is a retired colonel in the Marine Corps Reserve and served in Iraq and briefly in Afghanistan. He is on numerous boards of publicly traded and non-profit organizations. He can be reached at FRYAN1951@aol.com.
