Solutions in Indiana?

Over the past several days, I have read several articles touting conservatives from Indiana as the future of the chastened Republican party. In the latest, Mitch Daniels, Indiana’s governor, is lauded as a strong fiscal conservative who could lead the party back to its small government roots.

The question for the rest of us, then, is whether we are ignoring what is going on in Indiana as a source for the future of American conservatism.

What makes Indiana’s conservatives superior? I agree with the linked article’s author that those conservatives are simply pragmatic. Ideals are all well and good, and we should strive for them, but there is also the plain fact that some things just need to be done. We can dream, but our actions are dominated by the moment, and it seems that Indiana’s leading conservatives seem to take that ideal to heart.

What America needs now is a heavy dose of reality. There is no way for us to rescue our economy if the government spends $1.5 trillion on stimulus and $3.1 on budget in the next twelve months. Just like so many of the rest of us, the government is overextended and running out of options.

One of the options that remains is budget cuts. Real budget cuts. I am talking about 1 percent or even 3 percent of the current budget getting wacked. I am talking about cuts in every agency not currently directly involved in combat, intelligence, or homeland secrity operations.

I believe such a cut would send reverberations through the entire economy. Suddenly, billions of dollars formerly consumed by the federal government would be available to individuals and businesses alike to reinvest into the economy. Such a cut could conceivably stop the growth of the deficit and thaw credit markets overnight.

Sure, many, probably worthy programs will suffer cuts, but the long term effect would be a growing economy better able to fund those programs. With no cuts, the problem just grows until it collapses in top of those deserving programs.

Do you doubt this could work? It did in Indiana. Mitch Daniels cut the Indiana budget to keep the state in the black. Now, unlike the federal government and my state Ohio, Indiana is weathering the current crisis without crushing deficits that will take decades to repay.

So, is the solution to the modern conservative dilema in Indiana? At least when it comes to fiscal concers, it seems like it might be.


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10 Responses to Solutions in Indiana?

  1. Keneil says:

    The reality may be the option of government debt being cancelled.

  2. dlhitzeman says:

    I’ve heard that idea floated a couple of times, but I have no idea how canceling trillions of dollars in bonds would affect the entire world system, let alone the investments of billions of people so far untouched by the current crisis because they are invested in those bonds.

    I personally believe that such a radical step is unnecessary simply because I think there is plenty resolve in the economy if we can figure out how to transfer it from the crippled manufacturing foundation we have today to the technology foundation that lies just around the corner. The only way to make that happen is massive investment in education to retrain people into technology fields. That is the kind of stimulus our economy could use that I know would pay for itself down the road.

  3. dlhitzeman says:

    Of course, we could save ourselves several billion dollars by no longer supporting the UN and kicking them out of New York. Then we could focus on world solutions that benefit us as a nation instead of solutions that benefit the rest of the world but rarely us.

  4. Keneil says:

    Since “Main Street” feels entitled to government money,I see no inclination of any politician regardless of office or party willing to vote for massive, severe budget cuts. That is political suicide. From Obama on down, each is thinking of reelection and will do whatever is necessary to protect their job.
    Cancelling federal debt would allow finger pointing. People would be angry for awhile, then hunker down and get on with the business of life.
    I do agree that the UN is a waste of money but I think it will be thrown out on the same day that congress stops spending. Both have a snowball’s chance of that happening.

  5. dlhitzeman says:

    I think there would be more than finger pointing if the government canceled its bonds, especially from the foreign governments that hold most of them, but I see your point.

  6. Keneil says:

    Foriegn governments have no real recourse but to accept whatever decision our government makes. If that is cancelling debt, what are they going to do? I am sure that there would be tons of rhetoric, much posturing, and maybe some saber rattling. Even with our financial problems we are still the largest consumers and have the most money to spend in the world. Other countries now see what happens to their financial wellbeing when we stop buying their products. To me, in the long run, it is a case of whatever is good for our financial health is ultimately good for the world.

  7. dlhitzeman says:

    That’s an interesting view, but I wonder about the precedent. At the moment the United States no longer honors its debts, that makes any debts owed in the whole international community void. No one will pay anything if they think they can get away with it.

    Perhaps what I wonder about is not the actual idea of the US not paying its debts but the process by which such a thing occurs.

    Of course, I am not convinced that not paying those debts is good for our financial health either. In my view, the problem is not as much the debt as it is the reason behind the debt.

  8. Keneil says:

    There is already precedent. Other countries have been getting away with not paying their debts to us for years. I have no idea how much is owed but I would bet that the amount would easily get us out of the meltdown that we are in.

    The easy part would be to cancel the debt, the hard part would be making sure not to repeat the problem.

  9. dlhitzeman says:

    You have a good point that other nations have done so, but I cannot think of an example of a “first world” nation ever doing so except for maybe after World War II.

    Right now, the United States has about $13 trillion dollars in outstanding debt, about $11 trillion in bonds of which something like $8 trillion are owned by foreign investors including corporations and governments. $8 trillion represents about 12 percent of the global GDP.

    My point against canceling the debt, I guess, is that we cannot afford to cancel 12 percent of the global GDP. If we, as a nation and the world, are upset that the national GDP has decreased 0.5 percent–0.1 percent of the global GDP–what would a decrease of 12 percent look like?

    One alternative to canceling all of the debt would be to cancel the part currently owned by Americans. The problem with that premise is that everyone who has wealth currently invested in bonds would suddenly have nothing, but I think that problem is far more recoverable than a shotgun blast at the whole world.

  10. KMHitzeman says:

    Well, if the government debt is canceled, I want all my debt canceled too.

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