Government Debt and Deficits : SPEND LESS!

With all the problems that we are having in this country with our finances, debt and deficits, one would actually think that the majority of the population would have some idea about budgeting when times are bad. But this is not necessarily true.

Far too many people still harbor the false notion government will always find a way to solve a problem for us. All we have to do trust them. It always worked before, why not now?

Things change! Today is different then yesterday and tomorrow will look nothing like today. To be able to change with the times we actually have to take an active role in the process. We can no longer sit on the side lines while others make decisions that effect us all directly.

Ultimately, we make the final decisions that will make our lives better or worse when we vote. As long as we have the vote, and there those that think we aren't capable of voting responsibly, we all should make every effort to fulfill that obligation to our selves and our off spring by being informed as to what is going on in our country and who will change things for the better.

To do this, we must have good information based on past histories of the candidates and the incumbent, some idea about money and the effects of not having enough of it on our lives and why, then weight the facts as we know them. Be open all sources of information to make decisions, otherwise we run the risks of biased and managed information.

Never forget we are the responsibly parties in this debate. In the end, it all comes down to us to decide our own fate. Elections have consequences as we know only to well from 2008.


The Facts about Spending Cuts, the Debt and Gross Domestic Product
Source: Veronique de Rugy, "The Facts about Spending Cuts, the Debt and the GDP," Reason Magazine, July 29, 2011.

Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University, discusses the facts and myths surrounding spending cuts, the debt and gross domestic product (GDP).

Myth 1: You cannot reduce the deficit to an appropriate level without also raising taxes.

Fact 1: Spending cuts are the most effective way to reduce the debt-to-GDP ratio.
Harvard's Alberto Alesina and Silvia Ardagna examined 107 efforts to reduce the debt in 21 Organization for Economic Cooperation and Development nations between 1970 and 2007; their findings suggest that tax cuts are more expansionary than spending increases in the cases of a fiscal stimulus. Also, they found that spending cuts are a more effective way to reduce the debt-to-GDP ratio.

Myth 2: Lawmakers facing economic catastrophe forget about politics and adopt measures that address genuine fiscal issues.

Fact 2: Politicians rarely put politics aside. A recent paper by Andrew Biggs, Kevin Hassett and Matthew Jensen of the American Enterprise Institute shows that even in a time of crisis (or especially in a time of crisis), lawmakers tend to adopt policies for the sake of politics.
Countries in fiscal trouble generally got there through years of catering to interest groups and pro-spending constituencies (on both sides of the political aisle), and their fiscal adjustments tend to make too many of the same mistakes

Myth 3: We have had higher debt-to-GDP ratios before so we shouldn't worry now.

Fact 3: We should worry -- the debt-to-GDP ratio actually underestimates the size of the government's real liabilities. History appears to be reassuring, since several advanced countries have had debt-to-GDP ratios much higher than the one we have now without defaulting, so why should we worry?

Two main reasons: First, while our debt is big now, it's only going to get bigger in the coming years. Second, the debt-to-GDP ratio actually underestimates the scale of our debt problem because of intragovernmental debt, unaccounted liabilities and unfunded liabilities.