QUOTE(Ultimatejoe @ Feb 13 2006, 08:52 AM)
Ignoring politics for a second, it is a pretty rudamentary concept in financing that you shouldn't use capital assets to pay for continuing costs. Land rights/use aside, is nobody concerned about the bad economics behind using one-time revenues to pay for continuing expenses? I learned that that was a bad idea in grade 10 business class.
Switching to accounting mode... If you can't finance your expenses with expected revenues, then your expenses are too high, or your revenues are too low. Selling capital assets to raise revenues is never
a viable long-term solution.
Bang on the money.
And, in skeeterses
The idea of liquidating public assets to pay for federal programs is like a poor person selling his CDs to the Pawn Shop for grocery store money.
It isn't exact, since much of the land wasn't purchased in the first placed the way CDs are. It's more like selling the antique pocket watch you inherited from your grandfather to pay for groceries. But it's good enough to be going on with, and the important part is that you aren't spending the money on luxuries for the most part.
Sure, there will be some economies and cuts to be made. But, in the case of education (as it's already been mentioned), if the Feds cut spending entirely and drop Federal taxes, won't state taxes have to rise by about the same amount overall if educational standards are to stay about the same?
I mean, does anyone think that overall
the American economy spends too much
on education? Maybe the Federal proportion of it is too high, and it should be entirely State funded, but at the individual school level, don't they need (if anything) their spending maintained or even increased?
As parents, most people would say yes. This would likely apply to most areas of federal spending, I'd guess. If, as taxpayers, they vote for state governments that won't cut spending and won't increase the taxes to pay for it, then in effect all that would happen is that the Federal defecit would be devolved to state level. That's no kind of solution.
The elephant in the room here is that, with a defecit this large, even if you cut every cent from the Federal budget (effectively shutting down the US government, military and all foreign diplomatic contacts as well as all domestic federal programs) it would still take a while to pay it off at current Federal tax levels.
Rule of thumb: if the defecit is 6% of GDP, would be just under a year if Federal tax revenue is about 8% of GDP, but I don't know that these figures are remotely accurate.
But nobody suggesting the total shutdown of Federal spending, so it would more likely take several years, or longer.
And if the states rights crowd get their way on health or education, the defecit would still exist (someone would still have to spend the money), but the government would effectively be spreading it to states who'd have to up their taxes to maintain standards in essential areas like education, and to the citizens and to businesses who'd have to pay these taxes, or privately provide what was previously available publicly.
In simple scale terms, to scope for inefficiency is rather larger, not smaller, if the debt is devolved to millions of smaller levels, rather than one big federal debt. And the foreign governments that are funding the defecit at the federal level will almost certainly not lend Arizona their, or Joe Schmoe his, share of the debt at such favourable terms, so overall it would be MORE expensive to the American ecomony as a whole to try to cut Federal spending on essential programs like education.
And that's leaving alone the longer term problems that would be caused by removing funding from education, because, dollars to donuts, overall spend would
go down. Local politicians are as afraid of increasing taxes as national ones.
Which brings us to the elephant in the room - yes, their spending cuts that can and should be made to reduce the defecit. But sooner or later, there will HAVE to be tax increases
to fund them too. Better to do that now and limit the growth rate of a reasonably healthy economy than wait for the massively high levels of private indebtedness in America to grind consumer spending to a halt, and then have to increase taxes when the economy is in the deep recession that would likely follow.