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Fiscal Cliffs and Chicken Littles

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For those who are pacing the floors and taking anti-anxiety pills owing to scare hype about the “fiscal cliff” that public officials  and their unofficial spokesmen in the mainstream press have been issuing, I am about to put your minds at ease. This is the biggest tripe since, well, the most recent debt-ceiling debate, when the government and its media used another metaphor in telling us that the sky would fall if federal officials would not be permitted to add to the overall debt level of the federal government.

In fact, it’s appropriate that we begin a discussion about the scary scenario involved with the fiscal cliff with that debt-ceiling debate, given the fact that the fiscal-cliff agreement, the Budget Control Act of 2011, came into existence as part of the settlement over the debt ceiling.

First, what’s the debt ceiling? It’s an express acknowledgement that the level of debt acquired by the federal government is dangerously high. The ceiling is a maximum. By it, Congress is saying that the accumulated debt of the federal government is permitted to reach that level and no higher.

Don’t forget, after all, that the government is responsible for paying back its debt, just as private individuals are. The difference, however, is the way that the government gets a hold of the money to repay its debt. It taxes the citizenry. Thus, the American people are ultimately on the hook for all that accumulated federal debt.

The problem is that the government continues on its merry spending spree. It is spending more than one trillion dollars in excess of what it is bringing in with taxes. That’s what they mean by the deficit. It’s the difference between what they’re collecting in taxes and what they’re spending.

So, how do they spend more than what they’re bringing in? They’ve been borrowing the difference, year after year. That’s how the total amount of accumulated debt continues to rise.

In the past, they’ve hit up against the debt ceiling many times. What happens? The statist mainstream press goes ballistic and begins proclaiming that the sky is going to fall in if the federal government is not permitted to add to its accumulated debt. They scare most everyone (libertarians being the exception) into believing that the country’s survival depends on lifting the debt ceiling … just one more time.

The problem, however, is that after the debt ceiling is raise, the government doesn’t slash spending in anticipation of the new debt ceiling that has been set. If anyone suggests that (which libertarians do), the mainstream press, once again, goes ballistic. “That would be the worst thing! That will throw us into recession! We can do that after we achieve growth! Not now! We can’t cut a dime out of our beloved welfare-warfare state. It wouldn’t be fair to the thousands of politicians, bureaucrats, troops, contractors, suppliers, and foreign regimes dependent on the federal dole.”

So, each time the debt ceiling is approached, they just raise it again, notwithstanding the extreme financial and economic danger posed to the American people, as the setting of the debt ceiling itself acknowledges. Americans received a foretaste of such danger with the Greek government’s bankruptcy and the recent downgrading of the federal government’s bond rating.

What happened at the last debt ceiling-debate was an agreement. In return for lifting the debt ceiling one more time, the Democrats and Republicans agreed that a joint committee would be formed to figure out how to reduce the deficit. If they could not reach an accord, the agreement called for automatic across-the-board spending cuts.

That’s the agreement that public officials and their unofficial spokesmen in the mainstream press are calling the fiscal cliff.

Now, I know what you’re thinking when you hear all those scary scenarios about going over the cliff. You’re thinking that those automatic cuts are going to slash spending across the board by the tune of 50 percent or so (which would actually be the best thing that could ever happen).

Alas, not so, at least not according to Wikipedia. Consider this excerpt from its entry worth on the fiscal cliff:

During 2013, defense and non-defense discretionary spending would be maintained around 2012 levels due to the sequester. However, the spending begins to rise thereafter, but not at the pace projected prior to the sequester. In other words, the trajectory of spending increases is reduced, but spending is not frozen at 2012 levels. Defense and non-defense discretionary spending increases from 2013–2021 would be about 1.5% annually, significantly below the prior decade.

In other words, what we are dealing with here is not a cut in spending as ordinary Americans use the term. We’re dealing with a cut as Washington, D.C., uses the term—i.e., a reduction in the projected growth of federal spending.

Bottom line: there are no spending cuts in 2013 as part of the fiscal cliff, either for the welfare state or the warfare state. Instead, they continue spending the same amount of money for 2012, which means, assuming tax revenues stay the same, that they will, once again, be spending one trillion dollars more than what they’re bringing in with taxes. That means more accumulated debt, which means more danger to the American people.

In other words, it’s all hype by the statists to maintain their beloved welfare-warfare state at all costs. Nothing must be permitted to interfere with its existence and its expansion. In the statist mind, that’s the purpose of the American people—that’s why they exist: to come together and work harder to produce the tax revenue that will sustain the beloved welfare-warfare state.

That’s what all that scary hype is all about. Sort of a fiscal counterpart to those fake and bogus WMD scares about Iraq and Iran.

What’s going to happen when the next debt ceiling debate comes up soon? The mainstream press is going to go ballistic again, saying that the country will fall into recession again if the debt ceiling isn’t raised. Keep in mind that the mainstream press hasn’t called for any reduction in federal spending since the last time the debt ceiling was raised.

What’s the real solution to all this nonsense? To acknowledge that the welfare state and warfare state are alien to American values and our heritage of liberty and to simply dismantle them. That would obviously take care of the spending problem. It would also enable Americans to live without an income tax, enabling them to keep everything they earn.

By the way, that’s the way of life our American ancestors established for us. We should never forget that they lived without a welfare-warfare state and income taxation for more than 100 years. Too bad the statists were successful in foisting their statism on us.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.