The declaration in the Biblical book of Proverbs, chapter 22, “the borrower is the slave of the lender,” is quite instructive to the current situation of the federal government and the deficit spending binge it has been on for over a decade now. It was bad enough during the George W. Bush presidency. The Iraq and Afghanistan Wars were being paid for through increasing the debt load on the American people, and the Republican Congress instituted a Medicare prescription drug plan that had no funding mechanism to pay for it. But toward the end of the Bush administration and continuing on through the Obama administration, this profligacy has increased to new record levels.
The 2009 stimulus program added even more debt for the American people to bear. Foreign investors helped this along by purchasing a large chunk of this debt, and the Federal Reserve has been more than willing to help by monetizing the debt as needed. The first yearly deficit that surpassed $1 trillion (the actual increase in the total national debt) occurred during the last full fiscal year of the Bush administration, coming in at a robust $1.2 trillion. The deficit grew even larger, hitting $1.9 trillion in the fiscal year ending September 30, 2011. After dropping to “only” $671 billion last year (as the sequester’s automatic spending reductions had at least some bite and revenues increased a bit), the national debt has already increased by approximately $800 billion in the first six months of this new fiscal year.
And if all of this awful fiscal news was not enough to digest, the American people are facing unfunded federal government liabilities of many tens of trillions of dollars in the upcoming decades. These are unfunded because, at the moment, there is not enough projected revenue to pay for much of the expected spending, which will be mainly in the area of entitlements (Social Security, Medicare, and Medicaid).
I propose that two steps are necessary to stem this tide of red ink that is swallowing the American Dream. First, we need a Balanced Budget Amendment to the U.S. Constitution that will require bringing the budget in balance within five years of its adoption. Doing so would help to stabilize the spending of the federal government at around 18% of GDP. That is still too high for a truly limited, constitutional federal government, but it would be a starting point. Spending levels could be ratcheted down from there, and at least the flow of red ink would be stopped at that level of government. There is no lack of ideas for prudently cutting down federal spending, and we need to start implementing at least some of them sooner rather than later.
Second, we need to ditch the Federal Reserve and its fiat paper monetary regime and institute a modern day gold standard. As former Congressman Ron Paul and Lewis Lehrman wrote in 1982, in The Case for Gold, page 159:
It is necessary to balance the budget and institute a gold standard together. The discipline required for one mandates the other. If government is to be limited in size, the budget balanced and the market free, gold will be a necessary adjunct.
As the Bible instructs in Deuteronomy 25:15, “A full and fair weight you shall have, a full and fair measure you shall have.” The Federal Reserve has manipulated the U.S. dollar since its creation in 1913 and has so far destroyed 96% of its value. At this point, I guess we should be grateful that they have left us with even four pennies on the dollar. This manipulation must come to an end, by instituting a sound gold-backed dollar and Balanced Budget Amendment, as a line of defense against deficit spending.
—Ken Hamilton, LPAR Executive Committee member