The Federal Budget and the Crisis of Democracy

Last week, House Budget Committee Chairman Paul Ryan issued his 2012 budget proposal to much fanfare.

Ryan's proposal would "cut $6.2 trillion in government spending over the next decade compared to the President's budget," repeal ObamaCare, turn Medicaid into a block-grant program, reduce the top income tax rate to 25%, create a projected surplus of  0.25% of GDP by 2040, and reduce government spending to 15% of GDP by 2050.1

There's only one problem with Ryan's budget, and it is this: Ryan is not dictator-for-life.

The proposals in Ryan's budget are pure fantasies.  Ryan is a member of the House of Representatives.  He's up for re-election in 2012 and every two years thereafter.  There will be 14 House elections between 2012 and Ryan's proposed date to balance the budget, and 19 House elections until the proposal to reduce spending to 15% of GDP comes to fruition in 2050.  How can he possibly make proposals decades into the future?  And we haven't even mentioned the Senate, the White House, or the likelihood that ObamaCare and Medicare, crowning achievements of leftist welfare-state, will actually be repealed.  Lotsa luck, pal.

The fact that the Ryan budget was received as a model of fiscal responsibility shows just how out-of-control things really are.  Peter Ferrara, writing in the conservative American Spectator, lauded the Ryan proposal as "adult," "careful," and "restrained."  Ferrara writes "under Obama's proposed 2012 budget the federal deficit is still $1.2 trillion by 2021...Ryan's deficit by that year is $385 billion."2

So the sober, responsible budget proposal by a congressman not guaranteed to be in office past January of 2013, and whose party controls neither the Senate nor the White House, is that the deficit will be a mere $385 billion in ten years?  Get real.  If that's the best we can do, we're finished.  CNS News reported recently that the Federal government spent eight times its revenue in the month of March.3 The time to balance the budget is now, not in 20 or 30 years.

The budget reflects the existential crisis of democracy.  Our books cannot be balanced without an authoritarian governing process on one hand, or a disastrous collapse of American currency and credit on the other.

Consider the following: in the 50 years between 1960 and 2010, there were only six years the government did not operate in deficit.  Ryan does not propose balancing the budget until 2040.  That means that the conservative model of fiscal restraint assumes that the government will operate in deficit 74 out of 80 years between 1960 and 2040.  Deficit spending has become a bipartisan, multigenerational, permanent way of governing.  The fact that the House Republicans backed down from a "government shutdown" last week and obtained a mere $38 billion in spending cuts (out of a $3.73 trillion budget financed by $1.65 trillion in deficit spending) shows that the entire process is a charade.  Our current national debt is nearly $14.5 trillion, and now we are up against the statutory debt limit.  It's virtually a certainty that the congressional Republicans will agree to raise the debt ceiling to 100% of GDP or more next month.

The budget cannot be balanced by the democratic process. That is because we have three distinct groups, each acting rationally: clients of the welfare state, who vote to obtain as many benefits as they can; taxpayers, who vote to pay as little as they can; and politicians, who can only get elected by appeasing both groups through deficit spending.  Sooner or later, this house of cards will collapse.  There are no good options anymore.  As the House Budget Committee's website reveals, 47% of our debt is now held by foreigners.  Either foreigners will quit lending to the U.S., or the federal government will devalue our currency to pay the debt (resulting in massive inflation) or taxes will be raised to obscene levels, destroying economic growth.

All of this is happening because our country has become democratized far beyond what our Founders intended.  Twenty-five centuries ago, the philosopher Plato argued that democracy led to tyranny when the people rose up against the propertied class; the tyrant gained his power by first posing as a "defender of democracy" and a "man of the people" against the oligarchs.4  America's Founders knew this, of course, so they devised not a democracy but a republic of limited powers.  The Founders envisioned that factions antagonistic to each other would balance each other out.  But they never envisioned that government could loot the wealth of one faction and give it to another.  Under the original Constitution, the Federal government could collect taxes on excises and tariffs only, not on incomes.  Today, the government takes our money in the form of payroll deductions, and promises it to someone else before we even cash our checks.  When that proves insufficient, they borrow from future generations of taxpayers to pay for today's entitlements.  The insatiable appetite of the welfare state has destroyed the constitutional framework carefully constructed by the Founders.

Madison warned us of democratic urges like "a rage for paper money, for an abolition of debts, [or] an equal division of property."5  Today, our body politic is infected with all three diseases.

We have already seen authoritarian attempts to control the budget because the political process cannot.  Monetary policy has been placed into the hands of appointed commissioners on the Federal Reserve Board, and the justification offered for forcing every single person in the country into the authoritarian ObamaCare program against his will is the need to "control costs."  These measures have proven insufficient, so there will be more of them.  We are thus left with the unpalatable choices of an authoritarian denial of welfare state-benefits, or an authoritarian confiscation of property to pay for them.

Welcome to socialism, folks.  Welcome to tyranny.

1 Source: House Budget Committee Website; see especially Chart S-5, "Chairman's Mark vs. Status Quo" which predicts a .25% of GDP surplus in 2040.

2 Ferrara, Peter, "Paul Ryan's Adult Conversion," American Spectator, 4/6/2011

3 Jeffrey, Terence, "March Madness: U.S. Gov't Spent More Than Eight Times Its Monthly Revenue," CNSNews.com 4/4/2011

4 Plato, The Republic, Book VIII

5 Federalist No. 10
Last week, House Budget Committee Chairman Paul Ryan issued his 2012 budget proposal to much fanfare.

Ryan's proposal would "cut $6.2 trillion in government spending over the next decade compared to the President's budget," repeal ObamaCare, turn Medicaid into a block-grant program, reduce the top income tax rate to 25%, create a projected surplus of  0.25% of GDP by 2040, and reduce government spending to 15% of GDP by 2050.1

There's only one problem with Ryan's budget, and it is this: Ryan is not dictator-for-life.

The proposals in Ryan's budget are pure fantasies.  Ryan is a member of the House of Representatives.  He's up for re-election in 2012 and every two years thereafter.  There will be 14 House elections between 2012 and Ryan's proposed date to balance the budget, and 19 House elections until the proposal to reduce spending to 15% of GDP comes to fruition in 2050.  How can he possibly make proposals decades into the future?  And we haven't even mentioned the Senate, the White House, or the likelihood that ObamaCare and Medicare, crowning achievements of leftist welfare-state, will actually be repealed.  Lotsa luck, pal.

The fact that the Ryan budget was received as a model of fiscal responsibility shows just how out-of-control things really are.  Peter Ferrara, writing in the conservative American Spectator, lauded the Ryan proposal as "adult," "careful," and "restrained."  Ferrara writes "under Obama's proposed 2012 budget the federal deficit is still $1.2 trillion by 2021...Ryan's deficit by that year is $385 billion."2

So the sober, responsible budget proposal by a congressman not guaranteed to be in office past January of 2013, and whose party controls neither the Senate nor the White House, is that the deficit will be a mere $385 billion in ten years?  Get real.  If that's the best we can do, we're finished.  CNS News reported recently that the Federal government spent eight times its revenue in the month of March.3 The time to balance the budget is now, not in 20 or 30 years.

The budget reflects the existential crisis of democracy.  Our books cannot be balanced without an authoritarian governing process on one hand, or a disastrous collapse of American currency and credit on the other.

Consider the following: in the 50 years between 1960 and 2010, there were only six years the government did not operate in deficit.  Ryan does not propose balancing the budget until 2040.  That means that the conservative model of fiscal restraint assumes that the government will operate in deficit 74 out of 80 years between 1960 and 2040.  Deficit spending has become a bipartisan, multigenerational, permanent way of governing.  The fact that the House Republicans backed down from a "government shutdown" last week and obtained a mere $38 billion in spending cuts (out of a $3.73 trillion budget financed by $1.65 trillion in deficit spending) shows that the entire process is a charade.  Our current national debt is nearly $14.5 trillion, and now we are up against the statutory debt limit.  It's virtually a certainty that the congressional Republicans will agree to raise the debt ceiling to 100% of GDP or more next month.

The budget cannot be balanced by the democratic process. That is because we have three distinct groups, each acting rationally: clients of the welfare state, who vote to obtain as many benefits as they can; taxpayers, who vote to pay as little as they can; and politicians, who can only get elected by appeasing both groups through deficit spending.  Sooner or later, this house of cards will collapse.  There are no good options anymore.  As the House Budget Committee's website reveals, 47% of our debt is now held by foreigners.  Either foreigners will quit lending to the U.S., or the federal government will devalue our currency to pay the debt (resulting in massive inflation) or taxes will be raised to obscene levels, destroying economic growth.

All of this is happening because our country has become democratized far beyond what our Founders intended.  Twenty-five centuries ago, the philosopher Plato argued that democracy led to tyranny when the people rose up against the propertied class; the tyrant gained his power by first posing as a "defender of democracy" and a "man of the people" against the oligarchs.4  America's Founders knew this, of course, so they devised not a democracy but a republic of limited powers.  The Founders envisioned that factions antagonistic to each other would balance each other out.  But they never envisioned that government could loot the wealth of one faction and give it to another.  Under the original Constitution, the Federal government could collect taxes on excises and tariffs only, not on incomes.  Today, the government takes our money in the form of payroll deductions, and promises it to someone else before we even cash our checks.  When that proves insufficient, they borrow from future generations of taxpayers to pay for today's entitlements.  The insatiable appetite of the welfare state has destroyed the constitutional framework carefully constructed by the Founders.

Madison warned us of democratic urges like "a rage for paper money, for an abolition of debts, [or] an equal division of property."5  Today, our body politic is infected with all three diseases.

We have already seen authoritarian attempts to control the budget because the political process cannot.  Monetary policy has been placed into the hands of appointed commissioners on the Federal Reserve Board, and the justification offered for forcing every single person in the country into the authoritarian ObamaCare program against his will is the need to "control costs."  These measures have proven insufficient, so there will be more of them.  We are thus left with the unpalatable choices of an authoritarian denial of welfare state-benefits, or an authoritarian confiscation of property to pay for them.

Welcome to socialism, folks.  Welcome to tyranny.

1 Source: House Budget Committee Website; see especially Chart S-5, "Chairman's Mark vs. Status Quo" which predicts a .25% of GDP surplus in 2040.

2 Ferrara, Peter, "Paul Ryan's Adult Conversion," American Spectator, 4/6/2011

3 Jeffrey, Terence, "March Madness: U.S. Gov't Spent More Than Eight Times Its Monthly Revenue," CNSNews.com 4/4/2011

4 Plato, The Republic, Book VIII

5 Federalist No. 10