To think that the federal government can pull a rabbit from its hat and painlessly solve its debt problem is to believe in a fiscal Easter Bunny. From Simon Black at sovereignman.com:
In the late 1760s and early 1770s, the government of France was in a deep panic.
They had recently suffered a disastrous and costly defeat in the Seven Years War, and the national budget was a complete mess.
France had spent most of the previous century as the world’s dominant superpower, and the government budget reflected that status.
From public hospitals to shiny monuments and museums, social programs and public works projects, overseas colonies and a huge military, France had created an enormous cost structure for itself.
Eventually the costs of maintaining the empire vastly exceeded their tax revenue.
And by the late 1760s, France hadn’t had a balanced budget in decades.
Debt was ballooning, interest payments were rising, and the government of Louis XV was desperate to do something about it.
There’s a famous story in which the Comptroller-General of Finances summoned all the government ministers to make deep budget cuts.
But no one could come up with anything substantial.
The overseas colonies were too important to cut.
And they couldn’t cut public hospitals… because too many people were now relying on them. Similarly they couldn’t cut veteran pensions either.
At the end of the session they could hardly find anything to cut that would make a meaningful difference.
All of their fancy programs and benefits had become too ingrained in society at that point; and any cut would have proven politically disastrous.
I thought of this story earlier this week when the US government released a sweeping budget proposal that aims to cut the deficit over the next ten years.
In fairness I’m always happy to see any government cutting spending.
But before uncorking the champagne bottles it’s important to understand some basic realities:
The budget slashes $3.6 trillion in spending through 2028 while proposing zero cuts to Defense, Social Security, and Medicare.
To continue reading: …And Now For The Bad News