Why You & Your Kids Need to Understand Economics: Government Spending

US Government SpendingI spent 30 minutes the other day talking on the phone with a staff member for my U.S. Congressman. I was calling to voice my concern about the looming Internet Sales Tax (officially The Marketplace Fairness Act, a name George Orwell would have appreciated) which is currently in committee in the House.

I do not think this bill should pass, primarily because it is an additional wealth transfer of citizens’ money into the government coffers, to the starting tune of $50 billion a year and going up from there (according to the staffer).

I was informed that my Congressman, a Democrat, supports the bill. I also know that my two Republican Senators and my Republican governor support it. Clearly, there is bi-partisan support for collecting more tax dollars from citizens.

The staff member was exceptionally courteous and knowledgable. He informed me that over $50 billion in tax revenues was currently going uncollected which, according to some, should be collected. I asked if that meant an additional $50 billion would come out of the pockets of consumers and businesses and go into the pockets of government. He agreed it would.

Here’s an obvious question: why do all those state governments want an additional 50 billion dollars from you and me?  We both know the answer: so they can spend it.

This goes to the heart of one of the basic problems of American government in the 20th century. It has been a historic problem for most governments, but since the 1930’s, it has become the problem in the United States: our politicians like to spend our money in ever-increasing amounts.

How much money?  Just look at this chart:

US Government Spending 1900-2012 Nominal

This chart includes Federal, State, and Local spending – it’s an enormous amount of money.  Here are a few things to note:

  • From the days of Roosevelt to Obama, there’s been no signifiant slowdown in spending. Politicians often talk about cutting government spending, but the truth is that the huge majority of politicians (and the voters who put them there) want to take money from some citizens and give it to others (some of whom aren’t even citizens).
  • Spending continues to increase at an exceptional speed. As a point of comparison, $56 trillion had been spent up through 2001. From 2002 through 2012, we spent $55 trillion. In other words, we spent the same amount in one decade than we spent in one century.
  • A few savvy folks will point out that this chart does not take inflation into account (a thieving practice we will discuss in another post). This chart reveals basically the same upward curve, just at a slightly slower ascent. However you dice it, government spending is increasing over the long-haul.

As we discuss in our series Economics for Everybody, governments cannot produce anything. Instead, they can only restrict, consume, and redirect. The only thing that creates lasting wealth, however, is production. This means that governments that spend more and more cannot make a nation wealthy; ultimately, they will make them poorer. There is a good reason that it now takes two earners in a family to match what one earner did in the 1950’s and 60’s in terms of real purchasing power. Notice that it was in the 1960’s that the government really started taking more and more of our money and giving it to bureaucrats to spend as they please.

Most citizens do not realize this. Economics can become complex, so the majority of the populace just throws up its hands and hopes that the problems will go away. They will not.

In fact, by remaining ignorant of economics, most people are ceding control to those who do understand it, or who are in a position to influence it to their own ends.This goes back to a point we stress  at the beginning of our series on economics: men and women are sinful, and so will seek to take the productive energies and wealth from others to use for their own ends.  That is exactly what is going on with the Internet Sales Tax – it is just the latest way of trying to redirect more money away from citizens and into the purses of politicians.

What can you do about it?  Here are a few recommendations:

  1. Ensure that you and your kids understand how economics really works. There are many good books on the subject, as well as our video series Economics for Everybody.
  2. Learn more about the history of government spending and do some research yourself on this great site: US Government Spending. It covers every aspect of government spending in shocking detail. There is even an entire page dedicated to a history of US spending up to the present.
  3. Read a bit about the Internet Sales Tax and then contact your congressman to tell him or her not to support it. Yes, it is only a small cup compared to the buckets of money taken from us – but the buck needs to stop somewhere. Don’t be put off if your congressman (or staffer) explains that this is money going uncollected. The Supreme Court said it was perfectly right for it to go uncollected.  We the people are having more and more of our money siphoned off from us every year. We must stress to our representatives that we are on the road to poverty, and their primary job is to start finding ways to decrease government spending, as well as to decrease our tax burden. When you’re talking to them, point out the big picture – we are being taxed to death.

Government spending is a serious problem for our nation. The only long-term hope for us is that enough citizens come to understand the gravity of the situation and take action to begin putting brakes on this runaway train before it’s too late.

Government Spending - Train Wreck


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