We Are Already Over the Fiscal Cliff

by Congressman Ron Paul,  Statement on the Motion to
Concur in the Senate Amendments to H.R. 8, 

Despite claims that the Administration and Congress saved

America from the fiscal cliff with an early morning vote today,

the fact is that government spending has already pushed

Americans over the cliff. Only serious reductions in federal

spending will stop the cliff dive from ending in a crash landing,

yet the events of this past month show that most elected

officials remain committed to expanding the welfare-warfare state.

While there was much hand-wringing over the "draconian" cuts that

would be imposed by sequestration, in fact sequestration does not

cut spending at all.

Under the sequestration plan, government spending will increase

by 1.6 trillion over the next eight years. Congress calls this a

cut because without sequestration spending will increase by 1.7

trillion over the same time frame. Either way it is an increase

in spending.

Yet even these minuscule cuts in the "projected rate of spending"

were too much for Washington politicians to bear. The last minute

"deal" was the worst of both worlds: higher taxes on nearly all

Americans now and a promise to revisit these modest reductions in

spending growth two months down the road.

We were here before, when in 2011 Republicans demanded these

automatic modest decreases in government growth down the road in

exchange for a massive increase in the debt ceiling. As the time

drew closer, both parties clamored to avoid even these modest

moves.

Make no mistake: the spending addiction is a bipartisan problem.

It is generally believed that one party refuses to accept any

reductions in military spending while the other party refuses to

accept any serious reductions in domestic welfare programs.

In fact, both parties support increases in both military and

domestic welfare spending. The two parties may disagree on some

details of what kind of military or domestic welfare spending

they favor, but they do agree that they both need to increase.

This is what is called "bipartisanship" in Washington.

While the media played up the drama of the down-to-the-wire

negotiations, there was never any real chance that a deal would

not be worked out. It was just drama. That is how Washington

operates.

As it happened, a small handful of Congressional and

Administration leaders gathered in the dark of the night behind

closed doors to hammer out a deal that would be shoved down the

throats of Members whose constituents had been told repeatedly

that the world would end if this miniscule decrease in the rate

of government spending was allowed to go through.

While many on both sides express satisfaction that this deal only

increases taxes on the "rich," most Americans will see more of

their paycheck going to Washington because of the deal. The Tax

Policy Center has estimated that 77 percent of Americans would

see higher taxes because of the elimination of the payroll tax

cut.

The arguments against the automatic "cuts" in military spending

were particularly dishonest. Hawks on both sides warned of doom

and gloom if, as the plan called for, the defense budget would

have returned to 2007 levels of spending! Does anybody really

believe that our defense spending was woefully inadequate just

five years ago ?

And since 2007 we have been told that the wars in Iraq and

Afghanistan are winding down. According to the Congressional

Budget Office, over the next eight years military spending would

increase 20 percent without the sequester and would increase 18

percent with the sequester. And this is what is called a dangerous

reduction in defense spending?

Ironically, some of the members who are most vocal against tax

increases and in favor of cuts to domestic spending are the

biggest opponents of cutting a penny from the Pentagon budget.

Over and over we were told of the hundreds of thousands of jobs

that would be lost should military spending be returned to 2007

levels.

Is it really healthy to think of our defense budget as a jobs

program? Many of these allegedly free-market members sound more

Keynesian than Paul Krugman when they praise the economic

"stimulus" created by militarism.

As Chris Preble of the Cato Institute wrote recently, "It's easy

to focus exclusively on the companies and individuals hurt by the

cuts and forget that the taxed wealth that funded them is being

employed elsewhere."

While Congress ultimately bears responsibility for deficit

spending, we must never forget that the Federal Reserve is the

chief enabler of deficit spending. Without a central bank eager

to monetize the debt, Congress would be unable to fund the

welfare-warfare state without imposing unacceptable levels of

taxation on the American people.

Of course, the Federal Reserve's policies do impose an

"inflation" tax on the American people; however, since this tax

is hidden Congress does not fear the same public backlash it

would experience if it directly raised income taxes.

I have little hope that a majority of Congress and the President

will change their ways and support real spending reductions

unless forced to by an economic crisis or by a change in people's

attitudes toward government.

Fortunately, increasing numbers of Americans are awakening to the

dangers posed by the growth of the welfare-warfare state.

Hopefully this movement will continue to grow and force the

politicians to reverse course before government spending, taxing,

and inflation destroys our economy entirely.

Source: Campaign for Liberty, 2 January 2013, by Ron Paul