The Consequences of Cutting Government Spending Immediately

Back in September, I wrote about Gary Johnson and his proposals for a Fair Tax and a balanced budget.  I said that I am not a fan of the so-called Fair Tax, but that I do like his idea of immediately balancing the budget by cutting spending by 43%.

I recently received a comment regarding that post.  I will not quote the whole thing here.  It has bad language at the end, but you can read the whole thing here if you wish.  The commenter says to me, "So you want to cut fed spending almost in half?  Sure.  Go for it.  Just don't cry about the depression from hell that would follow."

While the comments were strong and more rude than your typical person, they do reflect a certain mentality that permeates our society.  It is Keynesianism.  While I think Keynesianism has been somewhat damaged in the recent years with the economic troubles and with the internet replacing the mainstream media, there is still a large faction that believes this stuff.  Some people think that if we cut government spending drastically, that major chaos would follow.

The comment about having a depression is not completely wrong.  If the government were to drastically cut spending all of a sudden, we would have a sharp downturn in the economy.  It would be quite painful for the American people.  But at least it would be temporary pain and we could look forward to a real recovery.

The big question is, what are the other options?  The other options involve more spending, more inflation, higher taxes or some combination of the three.  They will all lead to things far worse than the above scenario and they will all end in a far greater depression.  The voluntary economy is starving for savings and capital investment.  It is being sucked up by governments at all levels, but particularly the federal government in DC.

Most people don't know there was a severe economic downturn in 1920/ 1921.  The government did not come up with any grand stimulus plans.  It cut taxes and spending.  Most people don't know about it because there was a quick recovery.

On the other hand, people know about the Great Depression.  It dragged on and on as the government continued to spend money like crazy and prop up the bad investments.

We could eliminate the Department of Education tomorrow and the effects would be minimal.  Sure, the government school workers would be screaming like crazy.  But the education system is a complete disaster anyway.  Federal funding represents less than 10% of funding for most schools.  It would not be the end of the world.  While I'm against having to pay for government schools at any level, ending federal funding is quite modest.

Education is just one small example of the overall budget.  One easy cut would be to end the wars and bring troops home from all over the world.  This would save hundreds of billions of dollars almost immediately, without even firing people from their jobs.

After World War 2, there was a massive influx of soldiers returning home to America.  The economy was a mess.  The Great Depression didn't end with the start of the war.  The war brought rationing and misery to millions of people.  It was a continued depression.  The men got jobs, but it is hard to imagine they were any happier.  The depression ended with the end of the war.

The troops came home and, while there was clamoring to do something, the government didn't really do much of anything in the way of stimulus plans or a jobs bill.  Government spending decreased dramatically in 1946 and we basically saw an economic miracle.  Japan and Germany had their own miracles too.  This so-called miracle is called the free market.  When the government gets out of the way, prosperity happens.

We will not see a true and sustainable economic recovery until the government gets off of our back.  This means repealing taxes and regulations.  It means stopping the money printing machines.  Most of all, it means a drastic cut in government spending.  When government spending is cut dramatically, we can look forward to a quick and sustainable recovery and a return to the American dream.