Posted Online: Jan. 03, 2013, 8:37 am

Leaders did not dare to undeceive them

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By John Donald O'Shea

"Their leaders, seeking their votes, did not dare to undeceive them."

After World War I, the allies imposed "reparations" on Germany. The rationale was that German aggression had caused of the war; Germany should therefore reimburse the allies for damages done by that aggression.

In "The Gathering Storm," criticizing the reparations imposed, Winston Churchill wrote, "The multitudes remained plunged in ignorance of the simplest economic facts, and their leaders seeking their votes, did not dare to undeceive them. The newspapers, after their fashion, reflected and emphasized the prevailing opinions. Few voices were raised to explain that the payment of reparations can only be made by ...."

The same can be said about the fiscal cliff negotiations in Washington. President Obama assures the country that all will be well if only taxes are raised on Americans with incomes greater than $250,000. He vows not to cut entitlements. He speaks of cutting spending -- not by cutting spending, but rather by cutting increases in the rate of spending. And most of the American main-stream media uncritically echo the president. Now, Democrats and Republicans in Congress vote to raise taxes on couples with incomes greater than $450,000, while making no meaningful spending cuts, and half the country cheers deliriously.

So if we were to let the Bush-era tax cuts on the "rich" expire -- defined by the president as households making more than $250,000 a year -- how much will the higher income tax rates bring in? $56 billion a year -- 5 percent of this year's deficit!

Our deficit this year will be over $1 trillion. Raising the rates on those earning over $250,000 would still leave a 2012 deficit of $950 billion! And, then, only if the new revenues are used to reduce the deficit. But Mr. Obama wants instead to spend $50 billion for a new stimulus! Cynically, the Senate bill does even less.

Here is the simple fact: This country is running a $5 billion deficit each day. However the $56 billion in new taxes is spent, it will be gone in 11 days! The president is playing the American people for partisan advantage. His plan is a cynical joke. Speaker John Boehner and the Republicans make no serious effort to explain to the public just how serious the deficit is.

On Dec. 17, Bret Baier on the Fox News Channel demonstrated with simple graphs what is really going on in Washington. To keep it understandable, Baier referenced U. S. revenues and expenses for one month -- the month of November 2012.

Each day during November, the government brought in a little more than $5 billion of revenue. Each day during that month, the U.S. government spent more than $11 billion. The difference (deficit) is roughly $6 billion per day, or $180 billion for the month!

Of that $11 billion in expenses, the top items were:

-- Department of Health and Human Services (Medicare) roughly $3 billion a day;
-- Social Security roughly $2.5 billion a day;
-- The Department of Defense $1.8 billion a day;
-- Interest on the debt, $854 million every day.

Baier noted that economists say that the interest is the most concerning of all since the country gets practically nothing in exchange for it. Even worse, interest rates are subject to wild fluctuation.

In the words of former Sen. Evan Bayh, D-Indiana, "We've got a $16 trillion debt, and servicing the debt (paying interest on it) is hard now. This is with interest rates at record lows. God forbid something should happen to cause interest rates to go up even a little -- back to where they ordinarily would be. he burden of this debt would become immensely greater."

Alice Rivlin, Bill Clinton's budget director, attributed the bulk of the spending problem to the promises made under Medicare, Medicaid and, to a lesser extent, Social Security.

"They'll drive federal spending up faster than our economy can grow. Revenues won't keep up, so we have a problem. If you don't have enough revenues to pay for the spending, you have to borrow. And on the track that we are on, if we go on doing what is in the law over the next several decades, our public debt will rise faster than our economy can grow.

"When that happens you got a real problem, because you've got to pay interest on that debt, and your creditors see that your debt's rising faster than your economy is growing, so they charge more and more and it's a very bad situation."

Arthur Brooks, with the American Enterprise Institute, finds current debates about higher taxes misguided, with federal spending on overdrive.

"And the problem is right now you have a situation in which the government (is) overspending (and) tries to rationalize it by saying that actually the problem is we're under-taxing the American public. It's like your irresponsible brother-in-law runs up his credit cards and goes bust and says the real problem is because you've stopped sending me checks," he said. "The truth of the matter is our country spends too much."

In speaking of reparations, Churchill lamented, "No one in great authority had the wit, ascendancy or detachment from public folly to declare these fundamental brutal facts to the electorate; nor would any one have been believed if they had."

On the tax/deficit problems that is not quite true. Baier, Bayh, Rivlin and Brooks are sounding the warnings. But is anybody listening? Does anybody care?