Free Markets, Free People

Daily Archives: August 3, 2011

The tyranny of numbers (Updated)

Let me see if I can quantify the current and future budget situation.  It’s actually quite simple, and doesn’t require knowledge of anything other than elementary mathematics. The most recent analysis of the Federal government’s unfunded liabilities, to include the national debt, debt financing, Social Security, and Medicare, showed total unfunded liabilities of $61.6 trillion. I’ve seen substantially higher numbers in other analyses—up to $75 trillion, depending on how you score it—but let’s take this fairly conservative one.  What are the practical implications of this number?

Let’s see what we’d have to do to pay all that back in 30 years. I picked that length of time because a) it covers the entire span of Baby Boomer retirements, and b) it equals the longest maturity of any Federal debt instrument,  the 30-Year Note.

Let’s look at the rounded numbers, derived from the Statistical Abstract of the United States. In fiscal 2010, GDP was $14.63 trillion.  Of that $2.165 trillion was collected in Federal revenue, or 14.8% of GDP. $61.6 trillion, paid over 30 years, will require equal installments of $2.05 trillion every year.

Now we’ll make some assumptions.  Let’s assume that we get 2% growth this year, and that for the next 29 years, we get an average of 3% growth in both GDP and in tax revenues collected. We also have to assume that the US Government doesn’t run a deficit, or add and more to the national debt between now and 2041. And let’s even assume that the current 14.8% of GDP we’re currently collecting in revenues doesn’t rise to the the historical 17.8% average, and that we can fund the government on just revenues of 14.8% of GDP.

Finally, let’s remember that most revenue that has ever been collected in all of American history, as a percentage of GDP, was 20.6% in 1999, after a substantial economic boom. Prior to that was 1945’s 20.4%.

In order to pay off this year’s share of the $61.6 trillion in unfunded liabilities, the government will have to collect $4.261 trillion in revenues.  With an estimated 2011 GDP of $14.922 trillion, that comes to 28.6% of GDP. If we assume government revenues rise to the historical average, the we’ll need the government to take 31.6% of GDP in tax revenues. Happily, because we’re assuming a 3% rise in GDP and revenues for every year over the next 30 years, that percentage will decline slightly every year, until, in 2041, we’ll only need to collect 20.5% of GDP in tax revenues to pay off the last installment, assuming, again, 14.8% of GDP covers the operation of government.  If we go back to the 17.8% figure, then we’ll have to collect 23.5% of GDP in revenues.

Either way, for the next 30 years, we need to collect substantially higher tax revenues than we have collected at any time in the nation’s history, and we have to do it every year for 30 years.

Quite frankly, I doubt that this is even physically possible, much less politically possible. Quite apart from anything else, I have no confidence whatsoever that we will even have 3% GDP growth under a regime where more than one-quarter of national income is given to the government for the next decade.

If you want to see the year-by-year numbers, my Excel worksheet is here.

~
Dale Franks
Google+ Profile
Twitter Feed

 

UPDATE: A commenter points out that http://www.usdebtclock.org/ shows a total unfunded liability of $114 trillion. I believe that figure goes out to the year 2087, however. But, those calculations wouldn’t look that much different for individual years. We’d just have to support unsustainable taxes for 70 years instead of 30. Not that it matters, ‘cause we won’t do it anyway.

BTW, keep in mind that these numbers are just a simple back-of-the-envelope calculation to wrap our heads around the basic scope of the problem, not a precise model of government expenditures and revenues for the next 30 years. I wasn’t really interested in doing 20 hours of math for a 15-paragraph blog post, after all.

Testing new ways to post

Yes, that’s what’s up … I’m looking at ways to further expand my ability to blog from various platforms and apps.

So far, so good with this one.

~McQ

Twitter: @McQandO

- Posted using BlogPress from my iPad

Deficit “super-committee”? Dead on Arrival

One of the smoke-and-mirrors aspect of this debt deal that experienced observers noticed immediately was the “super-committee” that would negotiate the cuts before the December 23 deadline.  If that committee doesn’t agree upon suitable cuts, then the meat-axe of across-the board cuts, mostly focused in the defense area, will take effect.

Everyone with any sense understands that part of the process of making meaningful cuts in spending and thus the debt must address entitlement spending.  But apparently the liberal left is fine with gutting defense instead. Nancy Pelosi has basically declared that any committee members she appoints will oppose all entitlement benefits cuts.

The debt limit fight is over, but the fight over entitlement programs will continue for months. In the weeks ahead, the leaders of both parties in both the House and Senate will name three members each to a new committee tasked with reducing the deficit by at least $1.2 trillion.

The ultimate makeup of that committee is key. It will determine whether this Congress will pass further fiscal legislation, and, thus, what the major themes of the 2012 election will be.

At a pre-recess press conference Tuesday afternoon, TPM asked House Minority Leader Nancy Pelosi (D-CA) whether the people she appoints to the committee will make the same stand she made during the debt limit fight — that entitlement benefits — as opposed to provider payments, waste and other Medicare spending — should be off limits.

In short, yes.

"That is a priority for us," Pelosi said. "But let me say it is more than a priority – it is a value… it’s an ethic for the American people. It is one that all of the members of our caucus share. So that I know that whoever’s at that table will be someone who will fight to protect those benefits."

Right.  “Benefits” make up their “value” and “ethic”, meaning  they’ll decide what you owe others and what you’ll pay for it and you just shut up, sit back and be quiet.  That’s their “ethic”.  Their “values” lie in redistributing wealth they don’t earn but they certainly find no problem in dividing yours out to those who they favor and/or who will vote for more “benefits” from your pocket book (or in this case, out of borrowed money).

Obviously Ms. Pelosi hasn’t yet quite figured out that the “benefits” that are key to her political agenda and provide her political power are no longer affordable.  Claiming she’s clueless is an insult to the really clueless of the world.   The welfare state has run out of money and all that is has promised is no longer affordable.

Until these people are replaced with people who actually understand the concept of limited government, property rights and the fact that they don’t have the right to anyone else’s earnings, nothing will change in DC or for us.

~McQ

Twitter: @McQandO

Has“Arab spring” skipped summer and fall and headed into winter?

Probably.  I assume, to some (and they will know who they are) this will come as an “unexpected” turn of events:

Six months after young, liberal activists helped lead the popular movement that ousted President Hosni Mubarak, the hard core of these protesters was forcibly dispersed by the troops. Some Egyptians lined the street to applaud the army. Others ganged up on the activists as they retreated from the square that has come to symbolize the Arab Spring.

Squeezed between an assertive military and the country’s resurgent Islamist movement, many Internet-savvy, pro-democracy activists are finding it increasingly hard to remain relevant in a post-revolutionary Egypt that is struggling to overcome an economic crisis and restore law and order.

"The liberal and leftist groups that were at the forefront of the revolution have lost touch with the Egyptian people," says Shadi Hamid, director of research at the Brookings Institution’s Doha Center. "These protesters have alienated much of Egypt. For some time they’ve been deceiving themselves by saying that the silent majority is on their side—but all evidence points to the contrary, and Monday’s events confirm that."

Rather predictable, at least among those who objectively observe how the world usually works.  As I said early on, the most ruthless and best organized will win this little bout and it was obvious it was the army and the Muslim Brotherhood that shared those attributes.  They also came to an early agreement/alliance between themselves.   At that point, you knew the movement started by the “young, liberal activists” variously described as “Arab Spring” and the “Twitter Revolution” was doomed.

Proof?

The backlash among rank-and-file Egyptians became evident on July 23, when a march by revolutionary activists heading to the defense ministry was assaulted by residents of Cairo’s Abassiya neighborhood. More than a hundred people were injured.

Egypt’s secular and liberal activists have been campaigning for postponing parliamentary elections, initially planned for as early as June, so that they could better organize themselves and compete against the more established Islamists.

Elections have been pushed to November, but the liberals and the secularists appear not to have taken advantage of the delay. Instead of organizing themselves into a coherent bloc, they have set up minuscule rival parties and feuded among themselves, say analysts and diplomats.

"There is a power game going on—and the liberals and the entire secular movement are the weaker element, while the Islamists and the army are strong," said Laila Soueif, a liberal activist and human-rights campaigner who teaches at Cairo University.

The secular and liberal activists let the revolution pass them by while they feuded and fought among themselves.    Meanwhile the army and Brotherhood took advantage of the situation and are now poised to take control of the country – “democratically” of course.  And they’re certainly not going to agree to a delay in elections to allow their rivals for power any chance of better organizing themselves.

I think it is probably pretty clear what the outcome of elections will be and who will end up being squeezed out.   The secular and liberal activists have missed their moment.   Meet the new boss – same as the old boss.

~McQ

Twitter: @McQandO

Is Obama disconnected from the reality of the nation’s plight?

Michael Goodwin, writing in the NY Post, has some observations about President Obama that strike me as pretty “right on”.  It’s something I’ve noticed too. 

But the debt debate made it clear that Obama’s idea shop is running on fumes. Like a broken record, he’s stuck on the same song — bigger government, higher taxes. No matter the circumstance, he repeats the mantra.

For such a smart guy, he’s proving to be a slow learner about what works, and doesn’t. He, Nancy Pelosi and Harry Reid had their unfettered way for two years, and they blew a giant hole in the budget without getting much bang for taxpayers’ bucks.

Unemployment is a staggering 9.2 percent and rising, and most economists believe the economy is in serious danger of a double-dip recession. Obama’s answer: Let’s do it all again.

He gives lip service to the pain of the unemployed and underemployed, then trots out the old ideas. Usually he doesn’t even bother to repackage them.

Absolutely on target.   The mantra never changes or deviates. Those old ideas are, as always, anchored in the left’s love for taxes and class warfare.  The premise is that all we suffer today can be put at the feet of a select group of scapegoats:

So we heard again that the evil "oil companies" and "billionaires" and the "wealthy" and "big corporations" need to "pay their fair share." Doesn’t he ever get tired of saying the same things?

I don’t know which is worse: That he really believes such drivel will help America, or that he’s cynically throwing red meat to the Bubbas of his far-left base. Either way, he needs new material.

He seems disconnected from reality.  He seems to think that the same old policies that have actually gotten us into this mess will somehow get us out.   Proof that it isn’t just “red meat” for the “Bubbas of his far left base” can be found in the budget the White House submitted to Congress.  It was a pre-recession budget that gave no hint of understanding where we were economically.  It didn’t garner a single vote in the Senate – not one from either a Republican or a Democrat.  Yet Obama continues to push this message even as the numbers get worse and worse.  It’s all the “corporate jet owners” fault for not paying their “fair share” yet not a single corporate jet owner has ever had the power to put spend a single penny toward the 14 plus trillion dollar debt we’ve piled up.

Maybe he hasn’t noticed or doesn’t care, but the country is giving up on him. The shellacking his party and policies took in the 2010 midterms would be repeated if there were an election today. He’s sinking, and his approval is now a woeful 40 percent — that’s Jimmy Carter territory.

Indeed.   In the meantime, as Jammie Wearing Fool notes, now that he has more money to spend, it’s party time.  Obama will use his executive jet to travel to Chicago to hold an fund raising event.  As usual the spectacle couldn’t be more poorly timed:

Obama’s fund-raising team is using his birthday to plan events across the nation designed to benefit his 2012 re-election bid — both to organize and to raise cash.

† About 1,500 donors are expected at the Aragon Ballroom in Uptown for a concert with Herbie Hancock, Jennifer Hudson and OK Go. The tab runs from $50 a person to $35,800, which includes a private dinner with Obama.

† There will be 1,167 house parties across the nation today, designed to help build the field operation and Obama will speak to them and take questions from backstage at the Aragon via a Web video conference.

† A team of surrogates is being deployed to events in seven cities.

We all know politicians have to fund raise, but a lavish fund raising gala after an increase in the debt ceiling that puts the nation even deeper in debt may not be the best “optics” right now.   But when you’re disconnected, you usually don’t notice things like that.

~McQ

Twitter: @McQandO

WordPress screwed me: A Windows Live Writer 2011 Review

It’s now 1:00am.  I worked for 1.5 hours on the previous post, hit publish…and the only thing that got saved was…the title of the post.  All that work gone.

But I’m a stubborn SOB. I spent some time searching for some offline blogging tools, only to discover that I already had Windows Live Writer 2011 installed on my netbook. And it’s great. Not perfect, but at least I now can write and save drafts locally, and I won’t lose an entire post to the vagaries of the online editor in WordPress. And it’s free!

It supports the blog theme, categories, tags, media uploads, and just about everything I use on a regular basis. It’s way better than the clunky blog publishing feature in Microsoft Word, and it doesn’t have all that extra word processing/desktop publishing stuff that Word has.  It just has tools specifically relevant to writing and editing blog posts, plus comment moderating and administrative tools. And in addition to the WYSIWYG editor, it has an HTML editor and a preview screen built in.  Apparently, there are also a number of plug-ins available for it that I’m now keen to investigate.

I’m not usually a big rah-rah guy for Microsoft software, but this Writer application really works.

I re-wrote the previous post in Writer, saved a local copy of it, then hit Publish, and it all worked as smooth as a baby’s behind. I heartily recommend Writer. it’s a pretty neat little application.

Now, I can go to bed.

And, yes, I wrote this post in Writer, too.

~
Dale Franks
Google+ Profile
Twitter Feed