Home > Uncategorized > Cap Federal Spending at Twice God’s Tithe?

Cap Federal Spending at Twice God’s Tithe?

Only a spending limit amendment to the Constitution will be strong enough to restrain the explosive growth of federal spending. If God can get by on 10 percent [a voluntary tithe], Uncle Sam ought to be able to keep getting by on 20 [mandatory confiscation].

Representative Mike Pence at Southern Republican Leadership Conference (all comments in square brackets are mine).

It seems that Representative Mike Pence created quite a stir by proposing a Constitutional Amendment to limit government spending to 20% of GDP. What surprises me is that people seem to be excited by the proposition of the national government consuming 20% of the gross domestic product.

Dictionary.com defines gross domestic product as:

The monetary value of all the goods and services produced by an economy over a specified period. It includes consumption,government purchases, investments, and exports minus imports.

Read the above definition again. Take a deep breath.

Now, read it again.

The monetary value of all the goods and services produced by an economy over a specified period. It includes consumption,government purchases, investments, and exports minus imports. 

Government purchases are included in GDP, even though government produces nothing. So, all of Wimpy Government's IOUs promising to pay later for a hamburger today, are included in GDP. Under the proposed Constitutional Amendment government gets to consume (confiscate) 20%  of everything – goods, services, consumption, investments, plus more based on its own IOUs. So, unless there is something I'm not seeing in the proposed amendment, I don't see how it will limit government spending in any significant respect.

Plus, why in the world would we want to etch in Constitutional stone the government's ability to suck, vampire like, 20% of the country's productive capacity? What we should be doing is abolishing the 16th Amendment (Income Taxes) and the 17th Amendment (Direct Election of Senators). Unless we drastically reduce the size of government, kudzu government will continue to choke our economic liberty through ever increasing government debt. While I have often heard it proposed that the size of the national government be reduced by 50%, I'm in favor of a 90% reduction. The ambitions and designs of national government know no bounds. Unless citizens put their boot on the neck of Fedzilla and keep it there, it will come back with a vengeance.

Mind you, Socialist Dems (aka Progressives, Liberals, Socialists or Democrats for you politically correct types), are whining that, heaven forbid, shrinking government to 20% of GDP would turn the clock back to the 1930's (actually 1941 – facts are stubborn things). 

…we're now to the point where restoring fiscal balance across the credit system requires a roughly 60% contraction in both outstanding credit and the size of the Federal Government (in terms of dollars.)  That in turn will contract GDP by 40%.

He continues…

I understand this sort of prescription is considered politically unacceptable.

But math doesn't care about politics.  It simply accumulates more damage, day by day, until we accept the math – and the truth.  The gap [debt-to-gdp spread] has reached a size that is mathematically impossible to grow out of through expansion of GDP.

Once we accept the math – and the damage – we must demand that credit and monetary aggregates be strictly tied to GDP in the future to prevent this from happening again.  The Federal Reserve Act contains the necessary stricture, but no punishment for violations – and violate they have over the last sixty years.  We must add the missing "or else" and expose all credit, monetary and price aggregates in the economy so as to monitor The Fed's performance – and if necessary, jail them if they continue to offend.

We either accept the math and the damage that must be taken through our economy or we will suffer a political and economic collapse.

Those are the only options folks – we argue only "when", not "what."

It's the math.

If Denninger is correct, then GDP must contract by 40% which will force the government budget to shrink 60%. We don't need a Constitutional Amendment to shrink the size of the national government, we merely need to face economic reality. Government has been growing almost non-stop for decades. It produces nothing. It creates no wealth. Arguably redistribution consumes wealth through inefficiency, mis-allocation of resources, and by acting as a long-term drag on GDP growth.

We are past the point of taking economic, political or Constitutional half-measures. The size of the national government mush be slashed. If it is not, we will suffer the long-term consequences up to and including: shrinking GDP (absolute or year over year growth), high unemployment, inability to finance our government debt, deflation, national decline, etc. There is nothing to get excited about regarding a Constitutional Amendment which would carve in stone the government's power to take 20% of GDP and toss it down a rat hole year after year. Now is the Time for Economic Liberty. If God, Creator of the universe only asks we return 10% of all we earn to support His Kingdom, then government – creator of nothing (not even Tang, Teflon or Velcro) can "manage" on far less.
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Categories: Uncategorized
  1. steve
    July 24, 2010 at 1:37 pm

    Interesting post. I had not seen the Mike Pence quote.

  2. Terry Kinder
    July 24, 2010 at 2:36 pm

    Thanks. I’m not too crazy about the idea of giving the government “permission” to confiscate 20% of GDP – which, conveniently enough, includes government spending. If government stats aren’t to be trusted now, just imagine how they will be when the budget depends on them. Imagine the incredible GDP growth!

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