Friday, June 10, 2016

Why Democrats are Better for the Economy.

Thirty years ago the Republicans were the party of fiscal responsibility.  They were for smaller government at the time when government was huge.

Then Ronald Reagan came along and they took over the government.  They got rid of the the excesses the Democrats had at that time created and limited government.  Yes, those spending cuts were modest - because the excesses the Democrats had created were modest.

The problem was the GOP saw a winning strategy and went with it long after it stopped winning.   And stayed with it for from 1981 all the way to 2016.  That's 25 years.   The problem with cutting the fat is that if you keep doing it for almost thirty years, YOU RUN OUT OF FAT.   Picture the blind butcher, who started out trimming the fat, but has now moved on to the muscle and in some cases is now carving the bone.   That's what the Republican Party is doing.

Yes, there may be some fat left on out shrunken, anorexic government, but only a pro-ana idiot with a microscope could find it.

How do you tell that we cut enough?   Simple, you look at Kansas.   Kansas is what happens when you keep on cutting taxes - you turn a $600 mill surplus into almost a $700  million deficit, get below average job growth (even the Kansas GOP can't kill the economy that Obama gave to our country), bankrupt school districts, and (Source).

You can only cut so long, before you hit bone.   They hit bone in Kansas and need to stop cutting.

Part of the issue is that the GOP gave up on actually reducing spending, and is now just cutting taxes - just like they try to do in the Federal Budget.   That doesn't work, no matter how much it did (or did not) work in the past, increased efficiency only gets you so far.

How do you tell if you have cut to the fat or the bone?  You compare with other countries.  First of all, note that the US outspends the next nine other countries when it comes to the military. It was the next ten before Obama - thanks Obama - but he cut us back some and convinced other countries to help out in the middle east.  Keeping that in mind, you can check the general list.

Let's look at per person spending (all data from Wikipedia). 

The World spends on average $2376.  But the bigger, first world countries (20 largest economies) spend on average $16,110.   The US spends only $11,041, #15 out of the top 20.  If we wanted to spend less than South Korea (moving us down to #16), we would have to drop to $4,556.  And we all know one of the reasons why South Korea's spending is so low.

This nice graph demonstrates the Federal net outlays a a percent of GDP since 1929.
Click here for this nice graph

It is typified by 4 things.  
  1. A general trend up from 3% to about 20% now.  
  2. A large spike up above 40's for World War II
  3. A general decline starting in the 1980's (Ronald Reagan) and getting significant in the 1990's (Bill Clinton's incredible economy that kept going and going)
  4. The HUGE spike that stated with George Bush (took up back above Ronald Reagan at it's worst) and that Obama almost entirely fixed.  Almost, but not entirely.
Yes, we aren't all the way down to Clinton at his best, but  we are already below Reagan at his best.

But more than 70% of the US budget is on Military, Social Security, and Health Care.   The only place the GOP is willing to cut that HAS enough money left to actually reduce costs is the Health Care sector.  But more than half of the healthcare spending goes to Seniors - Medicare again.  The biggest cut would be the $371 Billion we are expected to spend on Medicaid in 2016. (Source).
The only way to really reduce spending is to cut Medicaid to the bone (or cut everything else we fund).   That is why we haven't done it.

The real problem is that government actually DOES work.  People that join the military really do act as a deterrent, preventing other countries from attacking us.  People in education really do educate our students, allowing them to get better jobs and make more money.  Health care and Senior care really do let people take risks without having to save up money for unforeseen health issues and aging.   The police actually DO stop criminals, encouraging honest economic activity. 

Which means we have 3 choices on how to reduce taxes.

1) Eliminate neccessary services, cutting long term taxes in the future, for temporary gains that get eaten up IN ONE YEAR - as proven by Kansas.

2)  Keep current services and pray that our economy gets better, reducing the need for social services.

3) INCREASE spending on certain services that we KNOW have solid return on investment.  Things like half-way housing for the insane who currently end up in prison - something that costs a lot more than a half-way house.  Things like education for at risk students - children of homeless, drug addicts, and criminals - that are almost 50% likely to go to prison - with the plan of turning them into honest, tax paying citizens.

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