Budget Cuts Are Meaningless Without Fed Transparency
Congress focused on issues surrounding government spending this week as talk of deficits, the national debt, and the debt limit saturated the airwaves. This is a positive development. In years past, there was very little concern over how much was spent here in Washington, how it was spent, or how much of our gross domestic product was being consumed by government. That blissful ignorance naturally resulted in decades of government spending with impunity, bringing us to where we are today: trillions in debt with astronomical entitlement obligations that will be impossible to fulfill in the not too distant future. So it is a good thing that there is so much political pressure now on our leaders to actually put the brakes on runaway spending.
However, even the most generous estimate of the spending cut passed this week – $38.5 billion – is a paltry 3.5% of the $1.05 trillion in spending through the next 5 months. This hardly makes a dent in our government's mountain of debt. Even worse than that, the non-partisan Congressional Budget Office (CBO) stripped away the accounting sleights of hand and scored it as only $352 million in cuts, which works out to less than half of one percent of spending. Still, the tiniest cut is better than the massive increases we have become accustomed to in federal budgets.
Of course, our disastrous wars in Afghanistan and Iraq are not even included in this budget as they are considered emergency spending. They constitute $3.3 billion in spending in the same period of time, so they more than cancel out any small cuts the warmongers may crow about.
I voted against the legislation funding government for the remainder of this year, as well as next year's budget because, as in years past, government spends far too much on unconstitutional programs. In spite of any rhetoric about fiscal responsibility, a point three percent (0.3%) cut does not suddenly make the rest of the spending constitutional or responsible. And, if the American people do not continue to hold the politicians' feet to the fire, you can be sure we will see massive spending increases again in the future.
In addition to Congress' spending, many Americans are finally paying attention to the spending done by unelected banking cronies at the Federal Reserve. Recently the Fed was forced to reveal some details of loans given out during the financial crisis of 2008 and they are truly shocking. Matt Taibbi points out in a recent Rolling Stone article that two very well-connected Wall Street wives got together and formed a real estate investment company that garnered $220 million in so-called "loans" (free money) from the Fed. Compare this number to the $352 million in spending cuts the CBO says are in the current budget! A few months later, one of the wives bought a $13.5 million personal residence with her husband, the CEO of Morgan Stanley.
The unelected, unaccountable Fed hands out as much or more money this way as our federal government spends, and yet receives hardly any attention. This is why I believe transparency of the Fed is a critical step to regaining control of our financial situation in this country. We can never get meaningful reforms if all eyes are on the $352 million so-called cuts, and transactions like the $220 million given to Wall Street cronies are done in the shadows. This is why I have reintroduced my Audit the Fed bill to this Congress. HR 1207 is now HR 459 and is essential to true fiscal reform and responsibility.
Posted by Aaron on 04/21/11 01:33 AM
The Federal Reserve is criminal and unconstitutional. Owned by private share holders.
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered." -
"Let me issue and control a nation's money and I care not who writes the laws."
Mayer Amschel Rothschild, 1790
THE PUBLIC NEEDS TO KNOW WHO REALLY OWNS AND CONTROLS OUR FED
Posted by Leonardo Pisano on 04/20/11 12:31 PM
"I've always thought it would be kind of neat to add my vote on how the taxes get spent to the form I use to file them. I imagine another page of the 1040 following the "bottom line" that has a list of proposed spending for the coming year with a check box and a place to enter a percentage."
Believe it or not, I have had the same thoughts. I asked about 20 people and EVERYONE agreed it is a good idea – as a principle. In my inquiry I said 50% can be allocated, 50% can be spent by government at will – but who is counting. What I found remarkable in my random poll, is that people of all colors and political preferences agreed .... it shows there is an underlying need for having influence on money spending. This, as such, is encouraging.
Note: FWIW, I did my poll in my home country, the Netherlands, so it may not be relevant for the entire population (I dont claim that anyway, because of the statistically insignificant sample).
Posted by Curious on 04/20/11 01:34 AM
Dr Ron Paul,
In foreign affairs, are you going to move against the "Israel 1st" people and remove them from our part of the world?
The price supporting them is serious problems with a big bloc of 1.6 Billion people.
Same goes for the US supporting the Saudi creeps as well.
It pays to remember both installed by PE.
Good Luck there, Sir.
Posted by Mike In Virginia on 04/19/11 10:16 PM
@James Downey: "Instead of an audit, I wish Congressman Paul would push for the elimination of the Fed altogether"
Are you aware of Ron Paul's book from last year, titled "End the Fed"? He does want to eliminate the Federal Reserve, as the title of his book suggests. He recognizes, as a practical matter, that a full audit of the Fed would be a giant step toward eliminating it. To that end, he has re-introduced his bill to audit the Fed.
Posted by Deft on 04/19/11 06:42 PM
It doesn't take an act of Congress for individuals to return to sound money. Just start keeping your savings in gold and silver. It's true they don't generate cash flow, but one day maybe we'll return to sound money and you'll be able to lend them out at interest. I can't personally get rid of the Fed, but at least I can refuse to hold their rotten money.
Posted by Jsmith on 04/19/11 04:54 PM
I truly admire Dr. Paul for his intelligence and common sense. Unfortunately the forces aligned against him and a few other true patriots in Congress is so great that nothing will be done.
Posted by Zenbillionaire on 04/19/11 03:42 PM
@ The Bug
"a millisecond of thought would suggest that concern is with us daily today; it won't be any worse."
I think if you're in for the long haul it probably wouldn't make any difference as you say, but it might be better for those flash in the pan types like myself. In 2000 I liquidated my retirement fund and took a very large hit in taxes. It would have been more satisfying if somebody had named a bridge or an aircraft carrier after me but, alas, nothing of the sort happened. Maybe if I'd had a proportional vote I could have had some effect on the GWB election that year but probably not. It is with no small amount of shame that I admit I actually voted for him that year. By the time 2004 rolled around and I had a firm grip on what a fruit loop the guy was, it was too late. I'd been unemployed for over a year and wasn't paying any taxes at all.
Posted by Bionic Mosquito on 04/19/11 02:16 PM
"Instead of an audit, I wish Congressman Paul would push for the elimination of the Fed altogether..."
His view is that, with some real transparency, the Fed will be eliminated. As truth is revealed, more will become disgusted.
"...and at least have congress control the money supply."
I am quite certain Dr. Paul would never desire such a position. No need to hope he changes his tune.
"Some believe that puts the fox in the hen house; however, at least there will be some real transparency as well as voter control of their behaviour."
Certainly a way to ensure that the destruction of the dollar comes sooner than might otherwise occur (and some would say "bring it on).
Please demonstrate all of the ways a) that congress is transparent today and b) that voters are holding congress accountable.
When you consider how short this list is, you might reconsider your desires for congress to control the money supply.
Posted by Mountainview on 04/19/11 02:06 PM
The point of no return is already reach (see my first post). It's like the endgame in chess: In a certain configuration the endgame is defined and if you are on the loosing sidey ou can simply give up.
Big Bernanke is running the endgame, for the politicians (and voters) I am sorry, like in chess it's only posturing.
Posted by Bionic Mosquito on 04/19/11 01:59 PM
In my more delusional moments (yes I have those beyond my rantings posted on these fine pages), I have thought along similar lines: individual choice as to how the money gets spent.
I will see you, and raise you one: Voting in proportion to taxes paid. Some might complain that the rich would gain too much influence in such a scheme, but a millisecond of thought would suggest that concern is with us daily today; it won't be any worse.
Neither your thought or mine a cure, but wouldn't it be fun to watch!?
Posted by James Downey on 04/19/11 01:43 PM
Instead of an audit, I wish Congressman Paul would push for the elimination of the Fed altogether and at least have congress control the money supply. Some believe that puts the fox in the hen house; however, at least there will be some real transparency as well as voter control of their behaviour.
Posted by Zenbillionaire on 04/19/11 12:31 PM
Today marks the end of another US tax season and I imagine many, like me, are glad to see it go-- happy to have another year to rest up before the next installment of "Adventures in Accounting" comes to a theater near you, but Dr. Paul's conversation on the subject of federal spending is nevertheless timely given the wounds inflicted by the slings and arrows of outrageous fortune are still fresh.
I've always thought it would be kind of neat to add my vote on how the taxes get spent to the form I use to file them. I imagine another page of the 1040 following the "bottom line" that has a list of proposed spending for the coming year with a check box and a place to enter a percentage. At the top you'd have a box that said something to the effect of "let my congressional representative decide", sort of a proxy, but for people who wanted to spend the time, there'd be places where you could say things like "10% goes to the BATF" or "5% to the War in Iraq". I suppose there'd have to be a fixed category for general operations, essentially the salaries and expenses of elected representatives, but everything else, all the bureaus, departments and whatnot, would be on the menu.
If I were John Lennon I'd probably write a song about it.
Posted by Reader on 04/19/11 10:35 AM
Interesting and good points. I would have included the LA crowd but maybe that's just me...
Posted by Bill Drake on 04/19/11 09:41 AM
Right on Gary – it is the size and scope of the federal government that lies at the core of our debt burden, and it is the congress that has created and is sustaining that debt. Cutting here and there, especially on the backs of social services rather than programs that benefit corporate/military interests, is a charade. Real change will only come when and if the individual states can rescind all of the overreaching powers abrogated to itself by the federal government, ( good luck with the stacked Supreme Court) and then find ways other than property tax to fund the essential services they offer their citizens. I wake up every day praying that an asteroid (or some other heavenly intervention) has hit and vaporized the US capital while Congress and the Supreme Court are in session and the entire Presidential entourage is in town – along with a national banker's convention, since I'm praying. Beheading this monster seems to be the only way that it will ever die, and the only way that the United States of America will ever be free again.
Posted by Gary J. Mallast on 04/19/11 07:41 AM
I think the esteemed Dr. Paul may have cause and effect backwards. As long as the members of Congress wish to keep expanding government and government programs, it will have a built-in bias to keep the Fed and its loans and trepidations secret. It is the responsibility of Congress to propose and pass a balanced budget. The ultimate authority on fiscal matters is clearly vested by the Constitution in the House of Representatives as the closest part of the Federal government to the people. If the House doesn't do its job properly then the House will have to allow abuses and institutions which allow it to do its job improperly. And, if Congress does its job improperly the consequences will surely come as Dr. Paul has pointed out many times.
Posted by Mountainview on 04/19/11 06:59 AM
"Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works".
- Mr John Mills, Manchester Statistical Society,1867
This is the future analysed already almost 150 years ago by John Mills.
Later Irving Fisher analysed the phenomena of the "Debt Trap"in the
Debt-Deflation Theory of Great Depressions (1933)
Conclusion: After this old theories politicians don't hold they key to a solution anymore. Big Ben Bernanke is going the only remaining path (beside an outright default) ie. reflation by money printing..
Unfortunately even free market partisans like Ron Paul can't escape this cruel truth !!!