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The Cause of Current U.S. Deficits and Debt

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Except for a brief period of time in 1835 under President Andrew Jackson, the United States has been in debt since the founding of the Republic. The first reported national debt in 1791 was over $75 million. Congress now spends more than that every ten minutes.

Since the last year of the Bush administration, annual federal deficits have exceeded $1 trillion. The federal budget is fast approaching $4 trillion a year. The national debt will soon exceed $15 trillion — more than our annual GDP.

Republicans and Democrats in Congress are at an impasse over spending cuts and raising the debt ceiling. Congressional leaders have met at the White House with President Obama, Vice President Biden, and Treasury Secretary Timothy Geithner. Fox News personality Bill O’Reilly, who has criticized Democrats for their “spending madness” and Republicans for their intransigence on raising the debt limit, has even offered to broker debt talks between the two parties. Senate Minority Leader Mitch McConnell says a congressional “committee” to address the deficit is likely. Twenty-one Senate Republicans are backing a bill to raise the debt limit by $2.4 trillion in exchange for spending cuts and a balanced budget amendment. The president wants to raise taxes on incomes over $250,000. Congressional Republicans are adamantly opposed to the idea.

With the exception of a handful of members of Congress like Representative Ron Paul (R-TX), no one in the House, the Senate, or the Obama Administration will face the real cause of current U.S. deficits and debt.

Funding for things like the Corporation for Public Broadcasting, farm subsidies, and foreign aid is certainly unconstitutional and needs to be eliminated. But ending these things in their entirety would have a miniscule effect on the federal budget.

The problem is the welfare/warfare state.

According to the Heritage Foundation, figures from the Office of Management and Budget show that the greatest expenditures of the federal government in 2010, aside from interest paid on the national debt, are Social Security ($721 billion), national defense ($719 billion), Medicare ($457 billion), income security programs ($363 billion), Medicaid and SCHIP ($284 billion), and unemployment benefits ($194 billion).

Spending in these six categories comes to $2.738 trillion.

Social Security is the cornerstone of the welfare state. It provides benefits for retirement, disability, survivorship, and death. Social Security is one of the entitlement programs funded by payroll tax deductions from both employers and employees, the other being Medicare. According to the recent annual report of Social Security’s Board of Trustees, 56 million Americans will receive benefits from the program in 2011.

National defense is certainly something everyone understands, but whether the defense budget should be $710 billion and how much of it actually goes toward defense is something to be seen.

Medicare is government-funded health care (which is called socialism by Republicans except when they’re referring specifically to Medicare and Medicaid) for Americans aged 65 and over and/or those who are permanently disabled. Like Social Security, it is funded by payroll tax deductions from both employers and employees, but only partially. Medicare actually consists of four parts: Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage plans), and Part D (prescription drug plan). Improper or fraudulent Medicare spending is said to account for over 12 percent of its budget.

Income security programs are welfare programs, like Temporary Assistance to Needy Families (TANF), Supplemental Security Income (SSI), energy assistance, and the Earned Income Tax Credit (EITC).

Medicaid is government-funded health care (which, again, is called socialism by Republicans except when they’re specifically referring to Medicare and Medicaid) for the poor. It is a joint federal-state program that is administered by the states. In place only since 1997, SCHIP is the State Children’s Health Insurance Program. It gives states matching funds for health insurance for families with children that are not poor enough to qualify for Medicaid.

Unemployment benefits were actually originally part of the Social Security program. The current unemployment insurance program is a federal-state program jointly financed via federal and state payroll taxes on employers only. Congress often extends unemployment benefits beyond the maximum benefit period of twenty-six weeks. The current extension expires on November 30 of this year.

All of the above welfare-state programs are clearly unconstitutional and illegitimate functions of the federal government. It doesn’t matter how popular they are, how many people they have kept out of poverty, how much people have grown to depend on them, or what the alternatives are. They still are not authorized by the Constitution. They still reek of socialism. They still foster dependency. They still aggress against those Americans that object to paying for them. And they still are not part of the proper functions of government.

The Heritage Foundation points out that defense spending has grown by 91 percent since 9/11. (The writer from the Heritage Foundation, which loves large military budgets almost as much as it loathes large welfare budgets, dismisses this increase because defense spending “still remains well below the historical average as a percentage of the economy.”)

The problem with the defense budget is three-fold.

One, it is wasteful. Even the Heritage Foundation points out that “a GAO audit found that 95 Pentagon weapons systems suffered from a combined $295 billion in cost overruns” and that “the Defense Department wasted $100 million on unused flight tickets and never bothered to collect refunds even though the tickets were refundable.”

Two, it is actually much larger than stipulated. Economist Robert Higgs has calculated that real defense spending is over $1 trillion. Even using the budget figures, the United States spends more on defense than the rest of the world combined.

And three, very little of the defense budget is actually spent on defense. The U.S. military maintains an army of occupation in over 150 regions of the world and over 1,000 foreign military bases. There are over 250,000 U.S. troops in foreign countries — not counting the soldiers fighting the senseless wars in Iraq and Afghanistan. There are still tens of thousands U.S. troops in Germany, Japan, and Italy — decades after the end of World War II. The wars in Iraq and Afghanistan are costing U.S. taxpayers over $10 billion a month. And it should be pointed out that not all of the costs of these wars are included in the official defense budget. The latest estimate of the long-term cost of these wars is a staggering $4 trillion.

The cause of current U.S. deficits and debt is the welfare/warfare state. Any talk of cutting the deficit, capping spending, and balancing the budget that does not take an axe to the root of the problem — the welfare/warfare state — is just smoke and mirrors.

You cannot put the government’s fiscal house in order and maintain the welfare/warfare state. Yet, Congress wants to have it both ways. House Speaker John Boehner is typical: “House Republicans have put forward real solutions that will save entitlement programs, such as Medicare for current and future generations, and put us on a path to balance the budget and pay down our debt.” Not only can it not be done, it should not even be attempted. The welfare/warfare state can and should be dismantled. Among its many evils, it is the root cause of current U.S. deficits and debt.

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