How Do We Create a U.S. Economy that Works?

by Burt on May 31, 2012

Written By Burton and Anita Folsom

“Every household in the United States today owes $557,745 due to the current federal unfunded liabilities!” And that’s “unfunded liabilities” only. Thus speak economists Art Laffer and Steve Moore. That means that every U.S. household has an average debt of over one half million dollars to prop up Social Security, Medicare, FDIC, pensions, and “other civilian employees benefits,” among other debt promises. To pay those debts will require 26 years of putting every dollar collected in federal taxes into an “unfunded liability commitment fund.”

How could politicians promise so much with no hope of ever delivering on these promises? And then have the nerve to run for re-election on the “good intentions” from the promises they made? Economist Thomas Sowell has an answer: “The fact that so many successful politicians are such shameless liars is not only a reflection on them, it is also a reflection on us. When the people want the impossible, only liars can satisfy them. . . .”

The current formula, according to Sowell, is that politicians say “yes” to cradle-to-grave health insurance, subsidies for an array of business friends, and hefty pensions for all kinds of government workers. Then, after enjoying votes of support in the short run, other leaders, perhaps decades later, get stuck with the bills.

Who started this mess? Not the Founders. In writing the Constitution, James Madison spoke for all the Founders when he said (in Federalist No. 52), “Let us consult experience, the guide that ought always be followed whenever it can be found.” Experience taught the Founders two important ideas. First, that power needed to be divided; and second, that government needed to be limited. People could not be trusted with much power because sooner or later they, or their successors, would use that power to take taxpayer dollars and perpetuate themselves in power.

For over a century, the system that the Founders designed worked well. From 1789, when George Washington took office, until 1932, with the election of Franklin Roosevelt, the national debt was less than $20 billion. But FDR was able to “reinterpret” the Constitution to allow many new federal subsidies, which he quickly parceled out to key swing states in order to win re-election–again and again. He broke the two term tradition and when he died, the U.S. had a national debt of $260 billion. The debt grew to one trillion dollars under Reagan; ten trillion under Bush; 15 trillion under Obama (20 trillion if he is re-elected). The limited government written into law by the Founders is only a distant memory.

But separation of powers and limited government can be restored if voters want to shed FDR’s utopia, which has failed, and return to Madison’s principles, which have proven correct. Limited government works for the good of all citizens in the long run and costs far less than an entitlement society. If the voters of the United States elect candidates who support a return to limited government, perhaps this burden of national debt can also become a distant memory to future Americans.

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