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The essential issue for government

by Dr. Richard H. Fink 1/2/2011

There were lots of questions prior to the November elections in the United States. Were politicians getting the message?  Did they agree with most Americans that spending was out of control?  Was it too late to save the nation from bankruptcy?

As the votes were tallied, the answer became apparent.  There was a dramatic change in the political landscape at the federal as well as the state level.

Those election results have prompted plenty of new questions, including the most important of all: what will these elected officials do now?

Are they ready to address the significant problems facing our economy because of government mismanagement?

Essential issue 

It’s fairly easy to talk about what our politicians should do, but it’s much harder to predict what they will do.

What they should do is stop bankrupting the country by overspending and over-regulating.  These are both heavy burdens we can no longer bear.

The issue of runaway spending – which many analysts agree was the major concern of most voters last November – has long been a bipartisan problem. 

Both Democrat and Republican majorities have looked the other way when hard decisions needed to be made.  Consequently, we have an epidemic of budget deficits.

The federal government already has over a trillion-dollar annual deficit and, by some estimates, more than $100 trillion in unfunded liabilities.  State budget deficits routinely total in the billions.   

Clearly, the essential first step must be to cut government spending.  By that I mean absolute spending, not just the rate of spending increases, must be cut.

Too often politicians have relied on reducing the rate of spending increases and called it a cut. In reality, the only thing that should qualify as a cut is when actual spending is reduced.

To help accomplish this essential goal, Congress must refuse any further bailouts – including those requested by states, pension funds or corporations.

Congress would also improve our nation’s economic health if it scaled back the enormous regulatory burdens that it continues to pile on businesses of every size.

Even though regulatory overreach has already had negative consequences, government agencies are pushing for even more dramatic controls and burdens.    

Favoritism

Many companies – in fact, even entire industries – have petitioned Congress for special treatment and advantages in the form of subsidies, mandates for their products or punitive tariffs on their competitors.

Rather than competing by serving the needs of customers more efficiently and effectively, too many businesses seek to lock in advantages through government favors.

This amounts to little more than corporate welfare that undermines the long-term prosperity of the country and wastes valuable resources.

Governments should not choose winners and losers.  The market is much more fair and efficient at sorting through those issues, with the winners being those who more effectively satisfy customers.

Rather than forcing products or programs upon us, federal policymakers, in particular, should promote economic freedom by letting consumers decide.

Consumers “vote” every day by buying the products and services they want.  By overriding those choices, governments create inefficiency and mal-investments.

State of affairs 

State governments must also change their business-as-usual approach.

Most states are required to have a balanced budget.  Unfortunately, they have deployed an extensive bag of tricks for avoiding that fiscal responsibility.

When it comes to creating budgets, they continually overestimate revenues and underestimate expenses.  This is wishful thinking on a frightening scale.

Most states are also guilty of raiding non-general funds, over-issuing bonds, delaying expenditures and underfunding pensions rather than eliminating non-core spending as the best defense against fiscal crisis.

Uncertainty 

One of Koch Industries’ advantages as a private company is the ability to think and act with a long-term perspective.  We need elected officials to do the same.

The recent vote on the so-called Bush tax cuts was a glaring example of short-term thinking.  Instead of taking a hard look at tax rates or the need to simplify and clarify the tax code, Congress approved a “temporary” two-year plan.

Two years may seem like a long time to a politician, but it is not nearly long enough to give the private sector – the real engine of economic growth – confidence for long-term investment.

When the rules are continually changing, businesses of all sizes find it difficult to predict costs and thereby justify the hiring of new workers or making extensive capital investments.

More than 220 years ago, James Madison (who later became our fourth president) warned about the consequences of such fickle government policies.

“Great injury results from an unstable government,” wrote Madison in the Federalist Papers 62.  With an “inconstant government, no great improvement or laudable enterprise can go forward.”

If our elected officials do not deal with our economic problems promptly and properly, we will face even more serious problems in the very near future.

The 2010 elections were all about putting a stop to government overspending.

However, voters must not become complacent. We must continually and effectively communicate with our elected officials, letting them know we will stand by them when they cut spending. But if they don’t, we won’t.

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