Monday, December 17, 2012

Lessons on Being Fiscal Grown-Ups...from Poland?!

Leszek Balcerowicz
"If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary."- James Madison 

After spending 22 years in and around Capitol Hill in Washington, DC, we can say without a shadow of a doubt that 'all men are not angels'.  And neither are the women.

Believe it or not, we did find that 90%, perhaps even 95%, of the people we met and worked with on Capitol Hill were good, well-meaning and very smart people. You just never hear about them. You only hear about the miscreants the media chooses to talk and write about because it helps drives sales of papers, subscriptions and ad revenues. 

Unfortunately, many of them are the leaders of both parties on both sides of Capitol Hill.

Here's a guy from Poland that everyone in Washington and you, the represented electorate, should listen to when it comes to being grown-ups about running our national federal government: Leszek Balcerowicz.

When you have a big problem, say with a losing football program, who would you rather have come in and turn things around, someone who has done it before or someone who says they can do it on their first try?

Mr. Balcerowicz has seen it all before.  As in Poland when it was breaking free of the shackles of communist rule and breaking into full-scale democratic and economic freedom.

Read this WSJ article where Mr. Balcerowicz gives out the formula for turning around an ailing economy, one that was far, far worse than anything the US economy has faced in recent years:

'Cut. Federal. Spending. First! Cut. Federal. Spending. Second! Cut. Federal. Spending. Third!' And so on.

He saw it work in Poland.  He sees the need for it in the current EU crisis, especially in Greece and the other PIIGS nations (Portugal, Italy, Ireland, Greece, Spain).  He sees it in the long-long-prolonged Japanese economic doldrums.

He sees the solution to the modern American economic dilemma the same as James Madison saw it: more limited government. Not expanded government as President Obama wants.
"If you reduce through reform current spending, which is too excessive, you are far more likely to be successful with fiscal consolidation than if you increase taxes, which are already too high."
Marcus Welby, M.D.
By comparison sake, it is like Mr. Balcerowicz is saying that we here in America needed to elect Marcus Welby, M.D. as the next president to help cure our ills. Instead, we elected Jack Kervorkian. Or re-elected him, that is.

Here's the kicker to all this: 'There is no such thing as fiscal austerity being proposed or talked about by any person or political party in America today!'

Why is that, you might ask?

What is 'fiscal austerity' anyway?  It is when your financial circumstances fall apart and you are forced to make do on less money next year than in this current year or years gone by.

How many of you out there would give your eyeteeth and other parts of your body to be at the same income level you were in 2006, let's say?  Many of you, we are sure.

Now, if any of the proposals put forth by the Republicans or the Democrats pass, aside from letting the sequestration sledgehammer fall on defense and discretionary programs as under current law, just how 'austere' would next year's spending be relative to last year, or 2011, 2010, 2009 or even 2008?

Not at all.  Zero. Nada. Zilch.  Federal spending would be far ahead of what they were in 2008, that is for sure.

There is almost no way for the federal government right now in America to become 'austere' in any way, shape, fashion or form! There is no 'fiscal austerity' being practiced in the US federal government right now, today!  Absent a massive dose of grown-up leadership from the White House and Congress, we will never accomplish what Mr. Balcerowicz says is needed in America and what worked in Poland.

In 2008, total federal spending was $2.982 trillion. (check out these charts from the White House yourself if your don't believe us:  'Historical Budget Tables'

In 2012, federal spending was $3.795 trillion. A 27.26% increase over these past 4 years.

Has your income gone up by 27.26% since 2008?  Think about it.

Projected spending for 2013 is expected to be $3.803 trillion.  In 2014, $3.883 trillion.  And in 2015, $4.059 trillion. You know that we will exceed those projections.

If we just held federal government spending constant at 2012 levels, and not cut one thin dime from current levels, we will balance the budget in 2017 due to the expected (don't count on it though) tax revenues generated by a recovered economy.

Unless President Obama has another Obamacare Joker's Wild card up his sleeve, that is.

Nope, no more Polish jokes.  Mr. Balcerowicz knows what he is talking about.  Can we replace Ben Bernanke with him now, please?


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