Speaker Boehner is on target: “To increase our debt limit without simultaneously addressing the drivers of our debt — in defiance of the will of our people — would be monumentally arrogant and massively irresponsible.” Cutting spending is actually a more important action than putting a ceiling on the annual debt. If we cut spending, then a reducing of the annual debt will not be far behind. But if we start by putting a cap on the deficit, which is what the Democrats often urge, then the door is open for spending increases, which will be followed by tax increases. That will stifle economic growth and fail to solve the key problem: massive government spending targeted to key political groups.
What does history tell us about U.S. economic development when spending is cut (which is the direction Speaker Boehner wants to go)? During the 1920s, the U.S. slashed government spending and achieved budget surpluses each year of the decade. We started that decade with 11.7 percent unemployment in 1921, but from 1923 to 1929 the U.S. averaged 3.3 percent unemployment, and the nation had rapid economic growth. In 1945, right after World War II, the U.S. again sharply slashed federal spending and we again had strong economic expansion and 3.9 percent unemployment in 1946 and 1947.
By contrast, during the 1970s, the U.S. increased government spending and the result was stagflation during both the Nixon and Carter presidencies. In the 1930s, the U.S. desperately threw dollars at unemployment and we doubled the national debt from 1931 to 1939; but in 1939 we still had 19 to 21 percent unemployment much of the year. President Obama has copied much of the New Deal spending pattern in the last two years and unemployment has actually increased.
The clear message from studying past performance is that when the U.S. exercises fiscal restraint, cuts spending, and balances its budget, the nation achieves rapid economic growth for all groups in the economy. Speaker Boehner wants to see Americans prosper. Therefore, he wisely advocates spending cuts first and foremost.
— Burton Folsom Jr. is author of New Deal or Raw Deal?: How FDR’s Economic Legacy Has Damaged America. He is a professor of history at Hillsdale College and writes for BurtFolsom.com.