Last week’s election showed strong signs of an increased focus on our debt problems and genuine concern by many candidates on reducing the debt.
This is an important step in the right direction.
The challenge Congress will face is that much of the budget remains off limits to cuts. Even with the newly elected House and Senate, there is likely not enough votes to make any serious reduction in entitlement programs.
And, since entitlements are growing because of demographics — more people on Social Security and Medicare, and the poor economy (more than 40 million people are on food stamps now, up from 26 million in 2007) — it is quite likely that entitlement spending will be significantly higher in two years than it is today.
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So, the focus will move to discretionary spending.
However, even if we eliminated all discretionary spending, including the military, we still wouldn’t eliminate the deficit.
The Republicans have made it clear that they don’t support cuts in any Homeland Security department. That’s more than half of our discretionary spending.
Plus, we can’t cut interest expense, which could easily rise at some point due to increasing fears about the massive money-printing operations we are about to begin.
So, there’s a lot off the table.
Yes, cuts can be made but many of those programs, like agricultural subsidies, have a lot of political support and aren’t very big in the overall scheme of things.
Clearly, there is waste that could be cut, but past Congresses have found waste an elusive animal to hunt down.
It is quite possible in two years that the Republicans will control the Senate and the presidency as well as the House.
At that point, there will likely be greater interest in cutting spending.
It’s also at that point we will find out if our greatest challenge to spending cuts isn’t our politicians, but our voters.
In this election, we saw more interest in cutting spending, but it was often for cutting other
people’s spending. You didn’t see too many people wearing signs that said "Cut my
We may find there is a great deal of interest in spending cuts, but not spending cuts in "my
Voters, like politicians, have gotten used to the easy money that comes from enormous amounts of borrowing and printing.
When spending cuts start to hit people, their views on spending cuts may change.
It remains to be seen just how much pain they are willing to stomach — until they are forced to by an inability to print and borrow more.
About the Author: Robert Wiedemer
Robert Wiedemer is president of the Foresight Group, a macroeconomic forecasting firm that customizes its forecasts for specific businesses and investment funds. He is a regular contributor to Financial Intelligence Report, the flagship investment newsletter of Newsmax Media. Click Here
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