By

Mac McDowell,

San Antonio Tea Party

The Congressional Budget Office’s (CBO) most recent report on the economy is dismal. The report projects un-employment at 8% or higher beyond 2014. Budget deficits are not expected to grow at the same rate as has been seen over the last four years due to the coming taxmageddon in 2013. Be that as it may, the percentage of the public debt as compared with Gross Domestic Product (GDP) will hit 73% by the end of this year. The projected growth of the economy is forecast to be below 3% for the foreseeable future. And that’s the good news.

What the CBO report goes on to say is that these projections are based on current laws.  At the outset of the report it states:

“However, the outlook for the budget deficit, federal debt, and the economy is especially uncertain now because substantial changes to tax and spending policies are scheduled to take effect in January 2013.”

“Uncertain” is the operative word here, there is so much uncertainty that essentially the CBO is clueless as to what will happen next, so the authors of the report have decided to write two projections in the same report. One is bad and the other is worse.  This report says that we will be in a recession again in 2013 (are we out of the last one?) and that the “official” unemployment rate will top out at over 9%.  Clearly, a cause and effect of the taxmageddon in store for all of us in January, 2013. Even though the “theoretical” tax revenues will be greater the report admits that the Obama-care plan is projected to grab a huge chunk of expenditures.

“In the last few years of the 10-year projection period, continued growth in spending for retirement and health care programs will cause mandatory outlays to grow faster than the economy, reaching 14.4 percent of GDP in 2022, compared with 13.2 percent in 2012.”

So as the Government takes more money out of the economy with the new taxmageddon rates, the CBO projects that GDP will shrink considerably and unemployment will rise.

“The contraction of the economy will cause employment to fall and the unemployment rate to rise to 9.1 percent in the fourth quarter of 2013, CBO projects.”

Essentially, the report confirms that we cannot tax our way out of a recession and into prosperity. The question that must be asked is, does the government have a taxation problem or a spending problem? The effects of excessive taxation are clear, for every dollar the government takes out of the economy that is one less dollar that the economy has to build businesses. In other words, as business grows, employment grows, but as government grows, employment drops. This is not a new concept; economists from William Stanley Javons in the 19^th century to, more recently, Arthur Laffer in the 20^th Century have written about this cause and effect but the government still refuses to learn the lesson.

The resistance to the idea of government down sizing in Washington is profound. This comes from the bureaucracy itself. The first rule in every bureaucracy is to ensure the survival of the funding stream, so always ask for more money when a new budget is developed. The only time in history there has ever been a true contraction in the size of the federal government was immediately after World War II.  The time has come to ask another question and that is: does the United States of America need a government which is larger than the government of the Peoples Republic of China?  If the answer is yes, as all of the bureaucracies will claim, what do we get for such a large government? What is the benefit? We have a Department of Energy that provides energy for no one. We have a Department of Transportation that provides transportation for no one.  We have a Department of Education that educates no one.  

The time has come to use a meat clever to cut down the size of government. There will be many in Washington that will say that this is not possible. Really? We went to the Moon; the Berlin Wall came down; anything is possible as long as we have the will to do it.  Yes we can reduce the size of Government and control the spending problem in Washington.

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