We always hear our politicians tell us how they will cut unnecessary spending in government and rein in waste. Whether it is cutting military spending or cutting “earmarks”, we are constantly reminded how much money our politicians will save us. Have any of them every actually delivered on that promise? You should not be surprised to hear that the answer is decidedly “NO!”

Government spending in the United States has decreased significantly only TWICE in the last century. Even in these two circumstances it was not the politicians cut spending, it was that the country no longer had to build tanks and aircraft carriers. The only two times in the last century that the United States cut spending in a significant fashion was after World War I and after World War II. Under every administration, government spending has increased dramatically.

From 1902 (the earliest year for which I have comprehensive data) to 2008, annual government spending in year 2000 dollars (to extract the effect of inflation) has increased from about $29 billion to $4.503 trillion, or $4,503 billion. That constitutes a 15,269% increase in spending over the period, or about 154 times more spending in 2008 than in 1902. Keep in mind, we are utilizing year 2000 dollar figures, so inflation has no effect on the value of the dollar figures. To put it another way, the government spent less than 7% of the total GDP in 1902 and spent more than 36% than the total GDP in 2008. To put it yet another way, the government spent about $370 per person in the United States in 1902, compared to $14,882 per person in 2008 (again in year 2000 dollars). Even at the highest point of spending during World War II, 1944, when the country was entrenched in wars in Asia, Africa, and Europe, government spending only amounted to $6,456 per person, well shy of what it is today. In 2008 the government spent far more on interest on its debt than it spent every year up to World War II.

I wanted to add this in: total government spending for 2008 totaled just under 37% of GDP for the United States.  Conversely, the declared socialist government of Venezuela’s spending totaled 26% of GDP.  The United States government is spending far more, in total and relative terms, than declared socialist societies.  The United States also spent relatively more than Russia, (32% of its GDP), Iran (22%), and a number of other countries that one would not expect to be more frugal than the United States.  Luckily, the United States does still spend less than some countries, including communist Cuba (72%).

Despite these absurd levels of spending by our government today, the people of this nation and the politicians still demand more and more. It is not just democrats, but republicans as well. Both parties are guilty of being addicted to the level of spending that is seen in our government today.

What are the consequences of all this spending? Waste, inefficiency, apathy, and control. Waste in that the government acts as a middle man in spending tens of thousands dollars for each of us. For their services they take a large fee that will never be distributed back to the taxpayers. Inefficiency in that the government feels it is far more qualified to spend your money than you are. Unfortunately they are wrong. The government never has and never will spend other people’s money as efficiently and effectively as people that are spending their own money. Apathy in that the people of these United States will inevitably lose some motivation to produce as they are further taxed. It is a natural event that if a person’s reward is diminished that person’s motivation to obtain that reward becomes diminished as well. Control in that as the government spends more and more of our money we depend on them more and more. If the government controls the means of production then they control the people. When a government has total control of its people things never end in prosperity and happiness. To borrow from the movie V for Vendetta, “People should not be afraid of their governments. Governments should be afraid of their people.”

What can be done to turn back the dial on spending and return to a state of liberty and free markets in the United States? This is a question that I believe only has one answer. An amendment to the Constitution will have to be presented. The amendment would have to limit government spending in any given year to some percentage of the previous year’s GDP. I believe this percentage should be somewhere around 5-10%. The amendment will have to include a clause to allow for a higher percentage of spending during times of declared war by the House of Representatives and the Senate. To prevent constant war, this percentage should only increase to around 30% and last for a maximum period of time, perhaps four years. The federal legislative branch will have to pass by a two-thirds majority the amendment. This amendment will then have to be passed by at least three-fourths of the legislative branches of the 50 states. Having this amendment passed by both the federal legislative branch and the states is difficult because of all the money each of these states receives from the federal government. If federal spending is cut then these states will, of course, receive less money. As such, it is extraordinarily unlikely that such an amendment would be feasible. As such, there are really only two events that I can foresee leading to such an amendment: federal bankruptcy or a revolution. Hopefully I am wrong.

Government spending is a direct threat to liberty in any nation. At the end of the day, however, if we are trying to find someone to blame for the incredible advances of government control over the last century we need only blame ourselves. After all, it is our votes that determine our politicians and it is our politicians that restrict liberty. The government’s power to restrict its people’s liberty depends on ignorance amongst the people. Liberty is your right as a human being and is what makes life worth living. Fight for it by staying informed and informing others.

Recently the Donkeys (Democrats) have been demanding that the government “rescue” domestic automobile manufacturers (GM, Ford, and Chrysler).  As they always do when they make a power grab to further control and steal from their constituents, politicians (namely Obama and Pelosi) have been speaking out regularly demanding “immediate” action by the federal government to give billions upon billions of dollars to these struggling domestic auto manufacturers.

The Wall Street Journal reported early Wednesday that Democratic leaders in Congress as well as the incoming administration from President-elect Barack Obama are formulating ways to include Detroit automakers in the government’s $700 billion rescue fund.

The Journal said Congressional Democrats plan to forward legislation next week to secure such a deal.

The move comes after House Speaker Nancy Pelosi called Tuesday for funds from TARP, or the Troubled Relief Asset Program, to be used in aiding near-bankrupt Ford, GM and Chrysler LLC.

Obama reportedly also is asking the Bush administration to free up funding immediately, the Journal said. Obama reportedly is seeking funds through the Treasury, Department of Energy and the Federal Reserve.

Politico.com also is reporting that Obama plans to appoint an auto “czar” to oversee reforms in the industry. That person would press for an “economically viable auto industry,” the Web site said.

Source: MarketWatch

A more short-sighted plan, I could not imagine.

The obvious crimes of this plan are in the taxation of the entire nation then redistributing that money to a small group of people – all while paying the government along the way to facilitate the forced transaction.  While this is the more serious crime, I don’t want to sound like a broken record.

The problem, outside of the government theft, is that this plan will simply not work.  Pelosi, Obama, and company were requesting a $25 billion rescue by the government for the auto-manufacturers.  Naturally, this number has now inflated to an unknown figure as the democrats are now attempting to include the auto-industry in the $700 billion (before $250 billion in earmarks) bailout that was initially intended for the financial sector.

$25 billion is a lot of money to distribute from tax payers to three large companies (GM, Ford, and Chrysler).  However, it will certainly become a far greater figure, especially if it is included in the $700 billion bailout.  Recently, Ford and GM have stated that they will run out of cash in 2009.  The problem is this: as of the beginning of 2008 GM had $25 billion in cash on its balance sheet and Ford had $35.3 billion.  That means that within a two year period (perhaps less) these companies will have blown through a combined $60.3 billion in cash.  Given that Chrysler will also be in on this $25 billion rescue, we can imagine that Ford and GM will be given a total of well under that $25 billion.  If these companies keep burning cash at the rate they are doing today then this “rescue” will keep them afloat for another couple of months before yet another and another rescue will be required.  This waltz between the government and the automobile companies will continue for years and will cost tax-payers billions of dollars.

So what should be done?  Should the government just stay out of it and let these giant companies collapse and allow for hundreds of thousands of people to lose their jobs?  Yes.  There is a reason that GM, Ford, and Chrysler are in much more trouble than Toyota or Honda – labor unions.  The domestic automobile manufacturers have signed huge contracts with labor unions guaranteeing certain levels of compensation to their employees along with a number of other benefits.  The companies are forced to pay their employees so much that selling their automobiles becomes unprofitable and they burn through billions of dollars of cash.  If these companies are left to the powers of the market, as they should be, they will likely either consolidate or go bankrupt.  In the event that they are completely bought out then it will likely be by a company that has tons of cash that believes it can do something different to make the company work.  If they go bankrupt then they will be protected from their obligations to their creditors and their employees, but will be forced out of business.  However, their assets will be put up for sale, including the brand names.  As such, a crafty company or a private equity group is likely to move in and purchase the assets of these failed companies, including the names themselves.  The money from these sales will be given to the manufacturers’ current creditors as payment on the collateral that was defaulted on.  The company or equity group that purchased the manufacturers’ assets will likely resume business as usual at the same plants producing the same automobiles.  Additionally, they will likely hire back most of the old employees, but without that same labor union contracts that forced the earlier manufacturers out of business.  In essence, if the market is left free to control itself then the companies will re-establish themselves as profitable going concerns and their employees will be able to rely on some job security that is currently deteriorating at a rapid pace.

The market is dynamic because people are dynamic.  A market is simply a group of people that express their wants and needs through supply and demand and the language they speak is price.  The current state of the domestic automobile manufacturers prohibits them from selling their products to the market at a price that enables them to be profitable.  The market will eventually push these companies out of existence and replace them with something superior.  Failure in the market is a good thing in that it allows innovation and progression.  Sometimes destruction is the most beneficial to creation.  The market knows this.  The government does not.

Suppose you just received your paycheck and were walking to the bank when you were approached by a man that was in the bottom 50% of income earners in the nation. The man requests that you give him $500 so he can pay his mortgage and fill his car with gas. Feeling that you can put your $500 to better use than to pay this man’s mortgage and fill his car with gas you tell him, “No.” The man then pulls out a gun and tells you that if you do not give him the $500 that he will take your money by force plus a fine for not giving it to him the first time he asked then put you into a cell where you will spend three to seven years of your life considering your mistake. Does it seem fair that this man should have your $500 that you worked for? I’m sure you can all see where this is going, but now imagine that the man is the IRS. This is exactly what happens every time anybody in this country makes money that is in the top 50% of income earners.

“A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine.” – Thomas Jefferson

President-Elect Obama is literally bringing back a type of draft:

“The Obama Administration will call on Americans to serve in order to meet the nation’s challenges. President-Elect Obama will expand national service programs like AmeriCorps and Peace Corps and will create a new Classroom Corps to help teachers in underserved schools, as well as a new Health Corps, Clean Energy Corps, and Veterans Corps. Obama will call on citizens of all ages to serve America, by developing a plan to require 50 hours of community service in middle school and high school and 100 hours of community service in college every year. Obama will encourage retiring Americans to serve by improving programs available for individuals over age 55, while at the same time promoting youth programs such as Youth Build and Head Start.”

This is truly unbelievable and so ominously indicative of what other steps he may take down the road to serfdom.

HT: Great Mankiw