John Rajcic’s commentary of June 16, “Should government run like a business,” uses improper data to draw the wrong conclusion. In it he uses this nation’s GDP to develop our debt to income ratio and then implies we are doing better than major businesses because this ratio is lower. The problem is the gross revenue of the federal government is not the GDP but rather the revenue collected from taxes and that number is significantly lower.
Gross Domestic Product is the sum of all goods and services produced in the United States in a year. You can think of it as the total revenue generated by all businesses in the U.S. By equating this with the revenue of the federal government, Dr. Rajcic is implying that everything produced in this country belongs to the government. Let me say loud and clear: It does not!
This nation was formed on the premise that the government serves the people, not the people serving the government. Governments are a necessary drain on society. They are a bureaucracy set up, by us, its citizens, for mutual self-protection and domestic tranquility. To use business terms, government and taxes are an expense we must pay to ensure domestic tranquility.
Thus to correctly determine how the government is doing “as a business,” we must look at it as a profit center and measure revenue received in taxes, the money allocated to it for running its day-to-day operations, against expenditures. In this analysis, the federal government fails miserably. In 2011, the federal government is projected to have total direct revenue of $2.165 trillion with total expenditures of $3.8 trillion. In other words, our “domestic tranquility” department is spending $1.645 trillion or 75% more then we allocated. If the security department of your business went over budget by 75%, wouldn’t you fire the department head? To make matters worse, the overspending of this department has accumulated debt of $14.3 trillion over the years. This makes its income to debt ratio 14.3–1 not the 1-1 that Dr. Rajcic claims.
There is one more difference between government and business. When a business borrows, it is to invest. Normally in equipment that will generate more revenue. Thus, there is a direct return on investment. If a trucking company borrows to buy another truck, that truck is used to generate more revenue. If the revenue generated is more than the amount of the truck payments, then the investment makes sense and the business thrives. Since our government cannot generate its own revenue, borrowing money only takes away from its ability to provide us service. The more we borrow, the fewer tax dollars come back to us in service because we have to pay back the debt.
Dr. Rajcic is right about one thing. The power to tax is the power to destroy and by taxing ourselves we are destroying our nation. We are not “buying civilization,” we are burying it.
David Scott Rosenberg