No More “Fantasy Diet Economics”— The Debt Deal And Demanding That Congress Deal With The Rules We Cannot Change

Most of us realize that the recent debt deal did not accomplish even a hint of genuine agreement on spending cuts. Instead, the deal struck includes raising the debt ceiling, future (unspecified and unenforceable) spending cuts, and no new taxes. That battle is over for now.

But the larger and more consequential battle is the ongoing fight to demand that America’s policy makers accept and deal with the reality that economic facts are among the rules we cannot change.

A close friend told me that during one of her recent daily jogs, she got to wishfully thinking, “Wouldn’t it be great if people could eat as much as they want, only exercise if they feel like it, and not gain weight?” Of course, wishing cannot change reality. When diet ads claim you can eat all you want of anything, do no exercise, and still retain a healthy weight, (“fantasy diet” ads), we know we’re reading false advertising.

And we know this because there are some rules you can change (like the legislature can change the speed limit, or parents can change their kids’ curfew), and there are many other rules that you cannot change because they are really just basic facts (like water will freeze below 32 degrees Fahrenheit, and consuming 20,000 calories every day and never exercising will make you overweight).

Yet liberal politicians today count on Americans to accept the “fantasy diet” mentality when it comes to America’s budget, government programs and entitlements. These liberal purveyors of fantasy assume that the same voters who know enough to reject fantasy diet promises -- will be duped by “fantasy economy” promises. Fantasy economy promises are the ones that say we can have endlessly increasing spending, and snowballing and swelling government-provided “free” services and programs, and still have a healthy economy.

Just as with fantasy diets, fantasy economics are grounded in lies, and no healthy outcome is possible from either. Dietary facts, as well as economic facts, are in that category of rules we cannot change. And no one, and no amount of wishing, can change that.

Just as we have to balance our caloric intake with our exercise, we have to balance spending and taxing. If we don’t, we perpetuate engorgement. And our American government is grossly overweight—in size, spending, and taxing.

But the good news in America in 2011 is that it appears that the vast majority of us know---big spending is the problem. And just as with diets when we truly cut intake, we must make long term and serious changes to our spending, and to our whole fiscal “diet,” to achieve health.

For decades liberals have trotted out -- to mollify concerns over how America could possibly pay for the endlessly increasing spending they propose -- the class-warfare based mantra, “increase taxes on the rich…make them pay their fair share… raise taxes on those evil corporations...”

For those still dreaming that government can perpetually raise more taxes to cover any and all new spending, consider just a few facts:

• If the government took ALL of the money every single “rich” American earned over $250,000/year, and ALL of the profits from all US Corporations, and confiscated ALL of the homes and property owned by all 400 American billionaires, and added all of that money together, they would not have enough money to run our country at its present rate of spending for even 8 months.
• Human and economic rationality will not allow for the tax rates that would be needed to balance the spending liberals in Congress advocate. People act rationally, which includes that they avoid behaviors that have high tax consequences.
  • For example, would you work if the government taxed your income at 100%? How about 99%? How about 80%? You get the idea—no one will work if the government takes away too much of the fruits of his or her labors. So at some level, raising tax rates on high-income earners causes them to stop working—and certainly stops them from hiring more employees thereby creating jobs, or starting new businesses that could hire unemployed people. This is not just theoretical. It has been proven in the study of American economic history: at higher tax rates, revenues to the government in the form of taxes collected decrease. See for example: (http://www.laffercenter.com/supply-side-economics/laffer-curve/)  
  • Even liberals discovered this reality in 1991when they passed a 10% tax on luxury items such as yachts, jewelry, private airplanes and expensive cars. Not surprisingly, people turned away from these luxury purchases. So much so that the $31 million dollars in anticipated tax revenues became instead a net loss of $7.6 million in tax revenues, because fewer people were willing to buy these luxury items given the tax on them, so fewer yachts, airplanes, etc. were produced, so yacht producers and companies that supplied parts and services for yachts laid off a total of 100,000 workers (who then paid less or no income tax). And the jewelry manufacturers and aircraft builders suffered equivalent job losses. (http://www.deseretnews.com/article/700169624/Tax-on-corporate-jets-would-only-cost-jobs-and-reduce-revenue.html) Wisely, Congress repealed this tax in 1993.

The point? Government cannot collect enough taxes in our free market system to pay for all of the spending big government liberals advocate. Liberal and conservative politicians know this—but the liberal ones unrelentingly advocate for more programs, more entitlement spending, more government, because these fantasy diet promises are the bread-and-butter of their political power. They gain power by promising what they know they cannot deliver.

So what can those of us who know spending must be cut, do? Here are a few ideas:

• Classify every new program any politician proposes as a scheme to raise taxes. Ask him and yourself if the program is worth that. Remember--spending requires taxing. Spending = taxing. 
• Ask every politician who proposes new spending “which programs will you cut to pay for the new spending---or are you proposing to raise taxes”? 
• Demand of your candidates in primaries that they agree cuts in spending and not higher taxes are the answer to our current economic woes. Ask them to define cuts they would make. Ask if they are willing to take on the morass of entitlement spending, the spending behemoth that must be reduced. • When politicians claim that we can keep every spending program in place and just tax the rich more --- attack their fantasy economic proposals—call them out for the lies they are. 
• Tell a friend or two…fantasy diets don’t work and neither does fantasy economics. The informed must help the duped.

Promises that the government can provide more and more for every single American with no harm to the health of our national economy are just as dishonest as the fantasy diets that promise you can eat everything you want and remain healthy. America needs every informed citizen on board the spending cuts train, and she needs elected officials who will deal in the reality that economics involve rules we must live by, rules we cannot change.