Bill Archer’s Death Is Reminder That Spending Cuts Won’t Shrink Government
Spending cuts will not shrink the federal government. When politicians promise the opposite, they’re not telling the truth.
“We must stop measuring compassion by the amount of money the government spends. We will cut spending, we will cut taxes, we will revolutionize welfare to put America on a better track.” Former Congressman Bill Archer, who died at 98 on July 4th, said the latter in 1995. And the words soothe to this day. Just the same, it’s essential to point out that the federal budget was $1.5 trillion in 1995 and total federal debt was a shade under $5 trillion.
Archer promised what Republicans always promise, and never deliver. And that’s not a knock on Republicans. The view here is that they mean and have meant well.
The problem is that they’ve never grasped that spending cuts pursued to shrink government or government debt are an utter non sequitur. The last way any sentient being would aim to shrink government is through spending cuts. Which on its face sounds odd, but consider what’s true: that politicians exist to spend.
Since they do, what’s shrunken through spending cuts invariably doesn’t shrink government, rather it frees up money that will eventually be directed to other priorities, thus growing them. And as they grow, so grow their political constituencies.
That’s what Ronald Reagan found out when he got to the White House. No matter the program, there was always a Democrat and a Republican vested in its ongoing existence and growth.
Which means the spending cuts sought by Archer logically didn’t shrink government, nor do they today. They paradoxically grow government precisely because they free up dollars for new ideas. Paraphrasing Robert Moses, easily one of the most successful appropriators in government history, he merely needed a shovel in the ground to make what was small quite large.
Taking this further, what happens if programs are shrunk, or big programs like Social Security are reformed, and government debt is shrunken in small or large amounts? In asking the question, ask yourself what happens when you pay down credit card debt a little or a lot. The more you pay down the much greater your borrowing capacity becomes, particularly if your incomings (earnings) are expected to grow in the future. Please think about that, and apply it to the federal government.
Assuming major, major spending reforms that result in trillions of dollars worth of debt retirement, will this ultimately shrink the federal government or its debt? It’s a clown question. If trillions worth of debt is easily retired, that will only drive market confidence in federal debt upward, and for obvious reasons. Think personal credit cards again.
From there, contemplate U.S. borrowing capacity growth not just with reduced federal debt well in mind, but pair the latter with the unrivaled ability of the American people to create abundant wealth. What does the latter tell you about future federal tax revenues along with the federal government’s borrowing capacity?
At risk of stating the obvious, the obvious needs to be stated given broad acceptance among “conservatives,” “liberals,” “libertarians,” and countless other ideologies in between that more federal revenue is required to shrink deficits and debt. What this signals is that the federal government is poised to soar in size alongside rising federal debt and falling federal borrowing costs. Bank on it. All because those who aim to shrink government aren’t focused on what’s enabled the growth not just of government, but indebted government.
We have a too much tax reveue problem, now and in the future. The size of government and its debts are symptoms of too much revenue now and in the future.
Originally published on Real Clear Markets.