Robert Knight: Debt's All, Folks


ACRU Staff


April 14, 2010

ACRU Senior Fellow Robert Knight wrote this column appearing on on April 14, 2010.

What with the bailouts, the stimulus, and now the government health care takeover, we’re being told that we face $1 trillion annual deficits for the indefinite future, with a $12 trillion to $20 trillion debt by 2020. In February, Congress raised the federal debt limit to $14.3 trillion. That’s bad.

But it’s only the beginning. Does anyone seriously think the current spending binge is all we can expect from this Porky Pig Congress? Programs are sprouting like crabgrass. The horrifying numbers we are now hearing about future deficits reflect projections of existing program spending. They do not count the inevitable spending that will flow from all the yet-to-be unleashed goodies that Congress and Obama have in their hip pockets.

Federal programs grow like Paul Bunyan and live far beyond their usefulness. There is simply no incentive to cut programs or staff, which would signal loss of power and prestige. Government managers face no profit motive or expectant stockholders. Businesses and households cut back if they overspend. The government just comes up with more ways to tax us, and in increasingly sneaky fashion. Have you looked at your phone bill lately? Who stuck all those esoteric charges there, with such names as “federal connection fee” or “Fred the bureaucrat’s lakefront retirement home fund?”

But let’s get back to the big stuff. The “doc fix” to restore physicians’ fees in Medicare that are artificially low and have been restored annually since 1997 will cost $200 billion over the next 10 years. This was not in the health care bill (what do doctors have to do with health care?) so Congress could pretend the massive bill will actually cut the deficit.

The health bill alone is expected to create upwards of 159 new agencies. And then there are the three elephants in the room: Social Security, Medicare and Medicaid, each of which is projected to break the Baby Boomer Bank in just a few years with unfunded liabilities in the trillions.

Will this tsunami of deficit spending staunch the congressional habit of creating new programs? Ha. And ha ha. You are such a child.

Let’s take short trip into Federal Program Land, which is in Washington, D.C., whose posh suburbs are exploding with tax-derived wealth from the rest of the nation.

In 1997, the Heritage Foundation produced a list of the Top 10 obsolete federal programs. The No. 1 federal boondoggle? The Economic Development Administration, which, Heritage scholar Scott Hodge noted, “duplicates the activities of at least 62 other community development programs. The EDA will spend $350 million this year to spur local economic growth. Yet a recent GAO study found the EDA had no impact at all. Zippo.”

Fast forward 13 years to 2010, and the release of the FY 2008 report of the EDA, which is a branch of the Commerce Department.

The agency spent $30.8 million in salaries and such items as $9.4 million for the “Global Climate Change Mitigation Incentive Fund.” All told, the EDA’s budget was $780 million, including $500 million in disaster relief funds (p. 7). That used to sound like real money until the multi-billion “stimulus” and bailouts.

Out of the agency’s total budget, according to the report (p. 4), “EDA awarded investments that totaled approximately $302 million. Of this amount, approximately $220 million funded construction projects that are expected to create about 59,000 jobs and generate nearly $7 billion in private investment, according to grantee estimates at the time of the award. This yields an average cost of $3,697 per job and a private capital investment to taxpayer dollar ratio of 31 to 1.” Wow! Sounds great. But not compared against the actual cost of each job created by the federal economic “stimulus” funds, which ranges from $30,000 to $500,000, according to USA Today.

Note the phrase “according to grantee estimates at the time of the award.” Let me translate, with dialogue provided by Elmer and Norm at the Podunk County development agency:

ELMER: Hey, Norm. We fill out this EDA form and we can get a mess o’ federal cash for the county to “create” jobs.

NORM: Is that all? Pass it over.

ELMER: We got to estimate how many jobs this grant will create.

NORM: They pony up about $3,700 per job, so we need to ask for $370,000 to create 100 jobs. And let’s say those jobs will generate, oh, I don’t know, how about $11 million in private investment?

ELMER: What kind of jobs?

NORM: Green jobs, Elmer. Think green.

Okay, it’s more complicated than that. But multiply this by thousands of federal grants across the nation, and you can see why it costs so much federal money to “create” jobs and how local, county and state governments get hooked on “free” cash.

And it’s why the tax-hungry Congress and Obama Administration are gearing up to impose a Value Added Tax (VAT) on Americans, just like the onerous, hidden taxes of Europe. A VAT taxes the value of a product at each stage of development. The paperwork alone is enough to keep hundreds of thousands of bureaucrats employed. And Americans won’t “see” the taxes on that $7 loaf of bread. They’ll think the baker or the store owner is greedy.

Meanwhile, as the monster munches away on a new revenue stream, Congresspersons will rub their hands together and find ways to “help” us with new programs.

Only $20 trillion in debt by 2020? Don’t count on it.



Join ACRU Patriot 1776 club

Related articles