When you're in over your head, the first thing to do is stop digging. With worldwide confidence in the dollar and the fiscal situation in the United States declining (as reflected in the value of the dollar), our esteemed leaders apparently consider it a low priority to reign in federal spending. The Treasury Department reported that the federal deficit hit an "all time high" of $311 billion for the first half of fiscal year 2008. 1 Though the government is already drowning in red ink, Congress apparently is considering further spending for the wars in the Middle East and "to help distressed homeowners and stimulate the economy". In addition, this year the first baby boomers - a generation over 80 million strong - will begin to retire and draw Social Security checks. As more retirees draw from the system, the burden on an already overburdened federal government will grow substantially. If every baby boomer receives just an average of $500 from Social Security, it will mean a $40 billion hit to the treasury every month. And let's not forget that the government also has other obligations to retirees like Medicare and prescription drugs. As breathtaking as it is watching how Congress handles taxpayer money, even more astounding is the utter lack of concern for the eventual consequences of their profligacy.   

   As the presidential election looms, we find ourselves with the choice of an even larger welfare state - and the spending that comes with it - and something maybe slightly more fiscally sane than George W. Bush. Barack Obama, an avowed socialist, has made it clear he supports more federal spending on programs like universal healthcare, energy technology, funds for homeowners to avoid foreclosure, child care, after school programs, and many other programs. The question is, can we actually afford it? With an increasingly bleak outlook for the federal budget and the economy, how is Barack Obama planning to pay for all that new spending? David Walker, the Comptroller General of the United States, spoke before the National Press Club last December and reported that the projected federal budget shortfall is $53 trillion over the coming decades due to entitlement obligations. In other words, the federal government is projected to take in $53 trillion less than what it needs to cover its obligations. As Walker said, "our government has made a whole lot of promises that, in the long run, it cannot possibly keep without huge tax increases". And tax increases is something our shaky economy can hardly handle right now. With the government already up to its eyeballs in debt, I don't see how Obama can possibly keep all his promises. He has to know this; the question is, does he care? It doesn't seem like too many other members of Congress care a whole lot. McCain seems less apt to introduce massive new spending programs based on his campaign website, and has even pledged to be a hawk on wasteful pork spending, but he has committed to either keeping taxation levels as they are or even lowering them. Low taxes are good, but if they aren't accompanied by major cuts in spending we can be sure of many more years of inflationary red ink.

   The only way to truly solve the deficit problem and the resulting inflation (which is largely responsible for higher prices today) is for there to be a major change in thinking on Capitol Hill and in the White House about the proper role of the federal government. As radical as it would undoubtedly sound in Congress, the federal government needs to be shrunk back within the constitutional bounds set by our Founders. The budget is unsustainable, and no matter what happens, the size of the federal government is going to shrink eventually. The question is, will it happen because Congress willingly reduces the scope and expense of government now, or because our nation goes bankrupt? Instead of simply protecting our life, liberty, and property (rendered "happiness" in the Declaration of Independence) and allowing us to go about our business, the government has become our caretaker, the provider of retirement income, healthcare, minimum wage guarantees, home loans, personal and corporate welfare, job training, etc. Nowhere in the Constitution does it say the federal government is authorized to engage in socialist programs like these. After their experiences with the tyranny of the King of England, the Founders were very distrustful of centralized power. That is why they designed our government to be a limited government, one with enumerated powers only. The Constitution was designed to limit the scope and power of the federal government, and the assumption was that it did not have a certain power unless the Constitution expressly granted it. This is why the Tenth Amendment reads as follows:

The text above begs a few questions: Does the Constitution grant power to the federal government to provide retirement income for all Americans? Does it grant the power to provide healthcare? Or education? Or a minimum wage for all workers? Are the powers to create such programs listed in the Constitution and hence granted to the federal government? The answer is an emphatic no to all of these questions. The Constitution does not authorize such programs. Does this mean that the people are prohibited from instituting government healthcare or retirement programs if they want them? Absolutely not. Such programs can be created, but only at the state level where government is more responsive to the people. Having said this, I recognize that people currently are dependent on federal entitlement programs and we should not renege on our promises to them by abolishing such entitlements outright. However, the big entitlement programs are unsustainable over the long term and we need to phase them out over time if spending is to be brought under control again. Comptroller Walker remarked to the National Press Club that "the major functions expressly envisioned by our Founding Fathers as a proper role for the federal government . . . like national defense, homeland security, foreign policy, the treasury function, the federal judiciary, the Congress and the Executive Office of the President" constitute just "38 percent of the federal budget". In other words, if the feds just stuck to their core duties it would mean that the federal budget would be less than $1 trillion! What would happen to our economy if the other $1.5 to $2 trillion of the budget was given back to the people?  What kind of prosperity could Americans generate for themselves if they had that much more money to save, invest and spend?

   As we get closer to the election, I hope that the issue of federal spending will become a central one. Americans need to take a honest look at our fiscal priorities and take step to bring them in line with fiscal reality. We cannot continue to mortgage the futures of our children and grandchildren to finance our irresponsibility today.