Unlike the Federal government, States cannot print money. Even though their borrow capacity and their corruption capacity exceeds any household by a mile, they still face the same basic economic realities ordinary citizens face (albeit on a bigger and more protracted scale). When States like Illinois fail to balance their budgets, they simply stop paying their bills, jobs get cut, lawsuits are filed, and legislators panic. There is no magic government money tree for Illinois. There is no Federal Reserve Bank to create more cash. The 2009 stimulus plan is basically a State bailout, but even that is woefully inadequate to address the mid and long term struggles these States face.

State budget difficulties could be a good thing, however. Because States have to actually confront budget problems, they are forced to (eventually) fix them. Some may decide to raise taxes as California did, other will make tough choices like slashing programs for things like education, such as NJ Governor Chris Christie. Still others will attempt to audit State budgets and eliminate fraud, waste and abuses. These are all legitimate choices. Naturally, the conservative prefers the latter two choices to the former, but they are all on the table. At least the decision actually gets made at the State level…eventually. They can’t vote to increase their debt ceiling infinitely, as Congress recently did.

When the Federal government is forced to quit living off Federal Reserve notes, they will have to make the same decisions. The popular policies of handouts, giveaways, and entitlements, will necessarily come to an end. Social spending will be left to the State government. If they cannot afford it, it won’t happen. The 10th amendment will be in force because it has to be.

Conservative activists insist on rigorous enforcement of the 10th amendment not only because it is the Founder’s vision, but also because it is the only way to hold politicians accountable. Any financial officer is only credible when they have limits to their budget. States meet that criteria. It isn’t perfect and it takes too long, but the job eventually gets done. New Jersey is evidence that tough choices will eventually get made. That’s more than we can say for the Federal government.

I was proud to work on the Adam Andrzejewski campaign for the IL governor seat. We didn’t win.  But today the ideas live on, because Illinois no longer pays it bills. Something has to give. At the State level, it always does…eventually.

The uninitiated may think debt reduction could be accomplished by reducing redundant, duplicate, and overlapping government programs. However, that won’t work because each of those programs represents a job for some government worker, and in some cases sends pork back home to a Congressional district. Then there’s Medicare reform. Given that the program is a $32.4 trillion debt entitlement, it would seem like low hanging fruit for a debt commission. That’s a non-starter too, however. Politicians rely on scaring seniors with the specter of Medicare cuts. To actually implement such cuts would (in their minds) be political suicide.

So what are we down to? Well, some question why we need a military presence almost everywhere. Since we spend roughly 29% of the Federal budget on the military, that sure seems like a good place to look for savings. However, Republicans are the party of the military, so that’s a non-starter as well.

Then there are tax hikes.

As is typical with any financially irresponsible family, excuses are made for needing the credit line to be raised. Those familiar with families struggling with money management know the story all too well: The person in charge of the cash goes out and blows the whole paycheck on lottery tickets, dinners out, and a huge TV. Then when groceries need to be purchased, they will claim they “must” use the credit card because groceries are non-negotiable. Its the oldest trick in the book for the financially foolish.

This exact trick was employed last year when Congress blew threw $827billion for stimulus and about $825 billion between the bank bail out and the auto bailout. Unsurprisingly, that adds up to just under the new “credit line increase”. As expected, we blew money on things we didn’t need and won’t work, before we spent money on things we *do* need like paying our bills and protecting our land.

If every man, woman and child in the country paid an even share of the $14.3 trillion debt, we’d all pay $40,141.11 Considering that not everyone in the country is able to work, that number gets much worse.

Stated a different way; there are roughly 138.5 million people in the US work force. If you have a calculator that handles trillions, you can figure out how much we’ll have to pay to get out of this. It works out to a little over $89,000 per worker.  $89,000!  Think about that.

The median American salary as of 2007 stood at $50,233. That means if every US worker used every paycheck for the next 1.77 years and didn’t keep one dime for themselves, we’d be able paid off our back debt.  Well, even that isn’t totally true, because the budget for FY2011 is $3.68 trillion.  So over the 1.77 years you were busy paying our back debt, you would have racked up $3.68 trillion in more debt to pay.  It’s a cycle that never ends, and sounds a lot like the situation a family is in right before they are forced to declare bankruptcy.

The news gets worse. While Obama has paid lip service to the idea of *deficit* reduction, via a 3 year freeze on certain discretionary non-defense spending, he hasn’t even announced a plan for reducing the debt. Keep in mind that even if we balanced the budget (a la Newt’s Contract with America), we still wouldn’t have done anything about the debt.

The way it out is horribly painful for almost everyone, and politically improbable. It will require massive social security and medicare cuts, and keeping tax rates right where they are. Trying to fix our national debt by freezing 17% of the budget is really ignoring the elephant in the room.

This is really not an optional process. We have only two legitimate choices: 1) The spending reforms outlined above, or 2) Wide scale monetizing of the debt, which will lead to abrupt, massive inflation. The scale of the problem dictates the scale of the solution. We can’t fix a debt problem equal to over 7 years of government revenues by tweaking a little here and there.

US debt has risen over the last 30 years

As a percentage of GDP (the total economic output of the country, of which Uncle Sam gets only a portion), the debt has taken a startling turn in the last year.  The other obvious bump in the graphs happens during World War II.  However, World War II was followed by a massive economic boom.  There is no such boom on the horizon now, not even in Obama’s analysis, which expects a modest 4% growth over the next several years.

If giving banks a bail out is “like a root canal”, I wonder what colorful terms our President would use to describe the changes we need to reduce our debt. The good news for him, and the bad news for us and our children, is that he’d never do it.

The only problem with the class was its teacher. Call me cynical, just one of those bitter people that go to church, if you will, but I just don’t buy it.

Since national security always seems to strike up emotions, let’s use that as an example. We could try the 911 thugs for maybe a million bucks in Gitmo. As John Stossel points out, that kind of number is just a rounding error in Washington. Instead, our team of national security gurus has been shopping the KSM show to various cities around the country at a cost of maybe 200 million, if you trust Mayor Bloomberg and his police Chief’s estimate.

Doing that sort of expensive thing doesn’t give Americans much faith in your ability to pinch pennies when times are tough.

Spending money is like crack to a Washington politi-thug. However much money got them high yesterday won’t be anout today. Let’s go to the highlight reel:

- The bank bailout (no it wasn’t needed, don’t even try that), $700 billion big ones.
- The AIG bailout, up to $180 billion now.
- The union auto bailout, that cost $75-$125 billion.
- The union cash for clunkers program…wait scratch that, that was a Japanese stimulus plan. That cost $3 billion.
- An $827 billion stimulus plan (don’t forget, it works!)
- A plane ride over NYC for a photo-op.  Yeah this one wasn’t *too* expensive, maybe only half a million, but it’s the thought that counts.
- Flying lots of congress people to Copenhagen for no good reason (at 2200 bucks per night per person for the hotel), $1.1 million.  Personally, I find that figure a little low.
Now this is a ton of waste, and I haven’t even listed all of them, just the most expensive or divisive ones.  However, I do have an idea for the KSM trial, and I think its going to be a win-win for everyone: Let NBC hold the trial, I hear they’ve got some programming holes these days, maybe around 10pm ET? As an added advantage, when the terrorists blow up NBC during the trial, no one will notice. Win-win!