It's the Spending Stupid

In Bill Clinton's first campaign, "it's the economy stupid" was a favorite phrase by Clinton and his team.  In some ways, they were right on because Americans tend to vote for their own self interest, and the economy is something that directly affects them.  There was a recession during the Bush presidency, although a recovery had already begun when Clinton was elected (with just 43% of the vote).

Now, it's really the spending stupid.  You can add the debt to that, but that is really just a result of the spending.  In order to control the debt, the spending has to be controlled.

Virtually every time the government spends money, it misallocates resources.  Even if the politicians had all the best intentions in the world, there is still no possible way they could allocate money exactly according to how each individual would.

Now that the government in DC alone is spending nearly 4 trillion dollars per year, that is 4 trillion dollars that is being misallocated.  It is not to say that it is necessarily being completely wasted (although some of it is), but it is not being used in its best way according to consumers.

If you included state and local government spending, government at all levels in the free U.S.A. is spending half the GDP.  This means that, on average, Americans are paying half of their income to the government, and this is before we even factor in regulations.

The only way this economy will improve significantly and sustainably in the near future is for a dramatic decline in spending.  While the immediate impact might be tough on some, it would allow resources to properly reallocate and would set the stage for a sustainable boom in the economy.

The problem right now is that the American people are not knowledgeable enough or desperate enough to demand a massive cut in government spending.  This would mean an end to the American empire.  It would mean scaling back so-called entitlements.  It would mean other things like ending the war on drugs, ending federal education funding (and hopefully state and local eventually too), ending subsidized college loans, ending farm subsidies, ending bailouts, and ending government charity.

While I am encouraged by the strength of the Ron Paul campaign, it is still not enough yet.  As long as there is not a big voice in America demanding these cuts, then the politicians are going to keep spending as long as the laws of economics allow them.

It is not too late for us.  There is still a lot of wealth, combined with great new technologies.  If Hong Kong could build itself up as one of the richest countries in the world when it started near the ground, then America can really boom.  We just need a change in the mentality of the people.  Once there are big enough numbers to demand a full-scale retreat by big government, then things will get better.  If the size and scope of government were cut in half within one year, then you would see an economic miracle take place.