AP-CNBC Poll: Cut federal services to balance the budget

According to an AP-CNBC poll released this morning, “To ease surging budget deficits, Americans prefer cutting federal services to raising taxes by nearly 2-1 in a new poll. Yet there is little consensus on specific, meaningful steps — and a wariness about touching two gargantuan programs, Social Security and Medicare.” Read the entire story here.

The bottom line is we simply can’t keep borrowing $1 trillion per year to fund our current level of spending. It isn’t sustainable. At some point in time, we become a bad credit risk. Interest rates go up … and then after awhile, no one will lend no matter what the rate. Just look at what’s happening in Europe right now.

While many Americans have aspired for years to mimic European “democratic socialism”, the current situation there is dire to say the least. Greece was bailed out for billions of Euros back in the summer and they’ve already had to apply for an extension on their repayment plan. Ireland received a gigantic bailout on Sunday this week. Portugal and Greece are teetering. The latest news says that the bond market has raised rates on Italy, France, and Belgium with Italy being seen as the next weak link in the chain if Portugal and Spain collapse.

Compounding the situation in the USA are the gigantic deficits being run by state and local governments. Everyone is borrowing to live beyond their means. Current estimates show the states to be a combined $250 billion in the red in their next fiscal budgets. California is approaching $20b. Illinois is at $13b. New Jersey’s next fiscal year looks like an $11b deficit. New York’s is $9-$10b. Massachusetts is over $2b in the red.

Many states are contemplating a combination of large tax increases with severe austerity budgets to get back on track. Guess what happens when taxes go up and services go down? People and businesses flee in droves and no new businesses start up, which means tax revenues drop, which means there is less to spend, so services drop, etc., etc. Some might call it a “vicious cycle”. Others might call it a “death spiral”. I call it circling the bottom of the bowl.

Let’s flush the spending before it flushes us.