From antiquity to American Revolution, the economy was structured in a top-down vertical hierarchy.
The economy flowed down from emperors and kings through feudal lords to the people.
When the king was good and benevolent, life was bearable. When the king was stingy and cruel, the people suffered miserably.
During the Renaissance and Enlightenment, people began questioning this top-down social order. Theorists applied their classical education to the concept of liberty and came up with a structure for society that could best be called "Classical Liberalism."
The classical liberal realized that individuals seeking to optimize their personal resources would effectively optimize the resources of the state. So, they sought a society with a limited government and an unlimited people.
Classical liberalism led to widespread prosperity.
The Classical Liberal created a new social structure in which the wealth of the nation flowed among the people. The government was limited to the few functions necessary to maintain civil order.
The American Experiment in Self Rule is among the most notable manifestations of this new idea.
So, there are two distinctive ways to organize an economy. The classical conservative view organizes society from the top down. Classical liberals created a structure in which the wealth of the nation is created by the activities of the people. Central authorities should be limited.
The title of this post is "Is There a Spending Problem?"
The answer to the question depends on the structure of the economy.
If the economy is structured in a top down fashion so that economic activity flows through a political hierarchy to the people, then the society needs an expansive government; otherwise things would become stagnant.
If the economy is organized on classical liberal principles with widespread ownership and wealth created by interactions between free people, then government spending is a negative force.
If you held the classical liberal views of America's founders, you would say that the Obama administration has a terrible spending problem.
If you held the classical conservative view that wealth is created by the central authority and flows through the people, then you would say there is not a spending problem. The answer to the question depends on the socio-economic structure of the nation.
As a libertarian, I happen to believe that the classical liberal structure for an economy leads to a better outcome than the centralized conservative structure of the ancient regime. I believe there is ample proof that economic liberalization leads to prosperity. But my personal beliefs don't amount to a hill of beans in this crazy world of ours.
Apologies for the Terminology
Some people might find my terminology strange. The problem is that the meanings of terms changed between the Revolution and today.
As you see the proponents of the ancient regime did not just lay down and die after the US Revolution. They were down, but not out.
In the early 1800s, the proponents of feudalism were diminishing so they sought to reframe their arguments. This process is quite clear in the ramblings of Hegel. Yes, I know Hegel, like the kings of England was German. How could a German philosopher express the views of the English monarchy (unless of course the German University system was funded by the Hanoverian Kings of England, which it was).
Anyway, the reactionary forces to US Revolution sought to reframe the philosophy of the ancient regime. Hegel did this by creating a thing called "modern logic." (NOTE, the term "modern" is quite old. In philosophy it refers the the new philosophical systems created at the turn of the 1800s.)
Hegel's modern logic promotes a process called "sublation" in which pundits manipulate discourse by changing the meanings of terms. Sublation is just a fancy word for systematic equivocation.
The Modern Conservatives of the 1800s sought to undermine the experiment in self rule by changing the meanings of basic terms such as "liberal." Conservatives of the day set to attack the concepts of liberty by heaping every invective known to man on "liberalism." Hegel himself created multiple exercises in which he framed slavery as freedom and freedom slavery.
The best example of Hegelism in practice today is Fox News. Fox presents news as conflict (dialectics) with the aim of dominating the news. They continue the process of sublation by projecting every false image they can on the term "liberalism."
Things were made more confusing when the Young Hegelians began manipulating discourse with modern logic. Karl Marx is the most notable of the Young Hegelians.
Marx realized that the best path to revolution is to define the opposition into a corner. Marx wrote a large tome called "Das Kapital." In this book, Marx claimed that the experiment in free market economics would devolve into a system in which large pools of capital would matter more than people.
When this happens the economy would become stagnant and oppressive and that the workers would rise up in revolution. The revolution would lead to a utopia called Communism. Marx defined "capitalism" in great detail but only alluded to "communism" is vague utopian imagery.
Don't you see the great irony. Karl Marx is the father of Capitalism. The term "capitalism" did not come into common usage until after the publication of Das Kapital.
Hegelian Conservatives (who support economic centralization) took to promoting Marx's definition of "capitalism" and promote the equivocation of Marx's Capitalism with the free market ideas of Adam Smith and the US Founders.
By accepting Marx's "Capitalism" as the foundation of our economic system, Conservatives completed the sublation of the term "liberal."
Our bloviating pundits have created a new language in which up is down so that answering basic questions such as "Is there a spending problem?" becomes hopeless.
America has a spending problem if our economy is organized along classical liberal principles in the wealth of the nation is the people and that the wealth of the nation increases as free people seek to optimize their personal resources.
We actually need more spending if our society is organized along classical conservative principles in which the wealth of the nation flows through the king to the people, or if it organized along the principles of capitalism as set forth in Marx's Das Kapital (the foundational document of capitalism).
The sublated terminology of Marxist/Hagelian tradition creates paradoxical views. Conservatives believe strongly in a top-down economic view in which the people are reduced to mere labor toiling away for massive centralized economic views. However, since Conservatives love the imagery of the Founders they support Marx's definition of capitalism. This leads conservatives to favor a top-down social structure with the masses cut off from benefits of the society.