Free Markets, Free People
I’m not sure how many times we or our politicians have to hear this, but to this point, it hasn’t made the impression it should:
Much of the public focus is on the nation’s public debt, which is $14.3 trillion. But that doesn’t include money guaranteed for Medicare, Medicaid and Social Security, which comes to close to $50 trillion, according to government figures.
The government also is on the hook for other debts such as the programs related to the bailout of the financial system following the crisis of 2008 and 2009, government figures show.
Taken together, Gross puts the total at "nearly $100 trillion," that while perhaps a bit on the high side, places the country in a highly unenviable fiscal position that he said won’t find a solution overnight.
Bill Gross runs Pimco, a based in Newport Beach, Calif., manages more than $1.2 trillion in assets and runs the largest bond fund in the world. Gross went on to say:
"To think that we can reduce that within the space of a year or two is not a realistic assumption," Gross said in a live interview. "That’s much more than Greece, that’s much more than almost any other developed country. We’ve got a problem and we have to get after it quickly."
"We’ve always wondered who will buy Treasuries" after the Federal Reserve purchases the last of its $600 billion to end the second leg of its quantitative easing program later this month, Gross said. "It’s certainly not Pimco and it’s probably not the bond funds of the world."
Now whether you realize it or not, that’s a good share of the bond market saying, "yeah, you know, not interested". That’s scary. And with China recently unloading some of its US debt notes, it’s not a happy picture for the US, fiscally. As Gross points out, in overall financial condition, we’re worse off than the basket case of Europe – Greece.
We have been getting these warning for literally decades. We’ve done absolutely nothing substantial to mitigate them. In fact, we added more to the pile (Medicare D and ObamaCare). We’re going to crash. It is time for a huge reality check, gut check or whatever you want to call it. But like the shopping addicted, we have got to cut up the credit cards, cut spending to the bone, get government out of areas it has no business and take as much power of the purse away from the Fed as we can.
This is beyond absurd. And the time to address it is now (if it’s not already too late).
I’m beginning to wonder if the Republicans can run just about anyone for President (note the qualifier – “just about” – not everyone, even among the declared candidates) and win given this economy and this president:
Americans’ disapproval of how President Barack Obama is handling the economy and its growing budget deficit has reached new highs amid broad frustration over the slow pace of economic recovery, according to a Washington Post-ABC New poll released on Tuesday.
The ratings boost Obama received after the killing of Osama bin Laden has dissipated with his job approval rating back to 47 percent. Forty-nine percent disapprove of his performance.
Obama’s approval rating bounced to 56 immediately after bin Laden was killed last month.
But it went back to a plurality very quickly. On the key issue, however, it hasn’t returned to a particular percentage – it’s gotten worse. Much worse:
Fifty-nine percent, a new high, gave Obama negative marks for his handling of the economy, up from 55 percent a month earlier.
Obama’s approval rating on the deficit issue hit a new low of 33 percent, down 6 points since April.
Anyone who doesn’t understand that is where the election will be decided hasn’t been paying attention to politics very long. Bill Clinton knew it when he rode to victory on his “It’s the economy, stupid”. Ronald Reagan knew it when he continually asked, “are you better off now than you were 4 years ago”? And Barack Obama would probably kill to have the economic problems Jimmy Carter faced – not that he’d do any better than Carter.
The point is, in bad economic times, incumbents have a tough road ahead of them at election time. That’s because economic issues, joblessness, insecurity and fear are felt and understood by everyone. Pocketbook issues are personal issues. And the public has always voted those issues in general elections – much to the disadvantage of incumbent politicians, especially presidents. There’s a number going around out there which claims that no president since FDR has been re-elected with unemployment over 7.2% . Of course keep in mind only a some of them since then have run for re-election and not all of them had bad unemployment numbers at the time. The point, however, is that this sort of issue is critical to re-election chances.
The survey reflects a broadly pessimistic public mood as high gasoline prices, sliding home values and high unemployment numbers raised concerns about the pace of the U.S. economic recovery, The Washington Post said.
Eighty-nine percent of Americans say the economy is in bad shape; 57 percent say the recovery has not started and 66 percent said the United States was seriously on the wrong track.
Forty-five percent said they trust congressional Republicans over Obama to handle the economy, up 11 points since March.
If much of what is listed in the first paragraph isn’t improving fairly dramatically when 2012 arrives, Obama is in for a long year and, just guessing here, an “upset” loss. The shine has worn off. The cache of electing a black president has run its course. History has been made. And now the results part of the show come to bear. Having been a moment in history won’t save Obama if the economy still sucks as badly as it does now.
My dad used to always tell us boys, “you live between your ears”, meaning attitude was critical to how you approached life and overcame obstacles. Attitude is also critical in economies. Pessimism isn’t the predominant mood one wants within the citizenry when they’re hoping to see it turn around. And it certainly isn’t the mood a president wants through out the lane when he’s running for re-election.
Yeah, this is going to be an interesting year and a half until election day 2012. I’m betting it’s not better economically and, again depending on who the GOP eventually nominates, Republicans stand to win the election. Or, and you heard it here first with all the caveats – it is most likely the Republican’s election to lose.
Of course, knowing them, I have little doubt they can manage to do that.
I think Bob Gorrell’s cartoon fairly represents what we should be talking about now after a week of bin Ladanpalooza.
As Dale said in the podcast last night, it seems much more likely we’re in the 2nd year of a “lost decade” than any real recovery. You get the feeling, or at least I do, that our so-called economic experts at the tiller of the ship have absolutely no clue as to how to proceed. Dale also mentions that if we were calculating unemployment and inflation like we used too in the ‘80s we’d most likely be looking at about 18% unemployment and 10% inflation and wearing our “Whip Inflation Now” buttons already.
In the meantime you can literally see the steam escaping the GOP push to trim the budget, cut spending and downsize government. It’s like everyone in government (and many voters) are still in denial.
If we were to resurrect the Misery Index, I’d dare say we’d be in new territory speaking of misery. And, as I stated on the podcast, I’m surprised there aren’t those out there asking Ronald Reagan’s favorite questions – “Are you better off today than you were 4 years ago?”
My intent isn’t to sound alarmist, but maybe it’s time to be more than just a little alarmed. Commodities are rising, wages are flat, and while we did see over 200,000 jobs created this past cycle, 60,000 of them were at McDonalds – literally – and we saw over 400,000 initial claims for unemployment registered. “Unexpected”, of course.
In fact, it seems that we’re getting sunshine pumped up our skirts with weekly pronouncements that it is “getting better” out there. Well, I for one am not seeing that.
I’ll skip right to the bottom line – Obama’s speech yesterday was an uninspiring restatement of the classic liberal tax and spend ideology that essentially says government is good and big government is better.
Once again to give his “4 trillion in deficit reduction” context “the chart” is offered:
4 trillion still leaves trillions in deficit spending over the next 10 plus years. And notice the trend as we head toward ‘19. That’s right – the impact of ObamaCare. I don’t remember a word about that particular program being on the table. 4 trillion in deficit reduction doesn’t answer the mail as far as I’m concerned because it means we continue to do more deficit spending and roll up more staggering debt. Had he talked about 4 trillion in debt reduction I might have taken him more seriously.
Essentially Obama said the same thing every other big government liberal has said for the decades it has taken us to get in this shape – let us raise taxes to pay for this mess we’ve gotten ourselves into and we promise to make it better. Trust us.
How many times must we hear this before we finally wake up to the fact that it isn’t going to happen that way? Raising the taxes on the rich isn’t going to curb spending. Only curbing spending does that. And while I saw a whole bunch of hand waiving about that in the speech, I’ve seen that in countless other speeches by politicians who claim the same.
Obama’s speech also was an attack on the GOP plan, and an establishment of the “granny will be eating cat food if they get their way” narrative again. Only the left can be compassionate in the proper way. The right? It hates you and wants to kill you.
He even went as far as to call the recent plan by Paul Ryan “unserious”. Obama additionally was completely disingenuous at one point, pretending that the only thing that Republicans were interested in cutting was spending in the “12% discretionary spending” side of things. Of course, as I’ve been telling you, these CRs only address that sector of spending, the rest – entitlements – running on automatic until each are addressed separately.
Obama wants us to believe we can afford everything at about the same level as we have it now if we’ll just tax the rich and “eliminate waste”. Of course his tax the rich plan would add about $32 billion in revenue a year to projected budgets and deficits in the trillions. If you’ve never been a fan of fuzzy math, then don’t take a deep look at Obama’s numbers.
Obama wants to you to believe that we can afford everything. That’s utter nonsense, but what it does is a) establish the ideological basis for the size of government and b) claim that size of government we have now is necessary.
A 70% cut to clean energy. A 25% cut in education. A 30% cut in transportation. Cuts in college Pell Grants that will grow to more than $1,000 per year. That’s what they’re proposing. These aren’t the kind of cuts you make when you’re trying to get rid of some waste or find extra savings in the budget. These aren’t the kind of cuts that Republicans and Democrats on the Fiscal Commission proposed. These are the kind of cuts that tell us we can’t afford the America we believe in. And they paint a vision of our future that’s deeply pessimistic.
Deeply pessimistic or startlingly realistic? I see it as the latter. Let’s just take one issue he mentions above. Education. A “Constitutional” role of government? Not that I know of. And, here’s the reality:
What you see charted there is utter failure. But the cost? Through the roof. We can’t afford a “return on investment” like that – yet Obama is ready to tax the rich and throw even more money down the federal education rat hole. Want to cut the deficit? Cut the Department of Education and leave the schools to the states and local communities. We. Can’t. Afford. It. And obviously big brother hasn’t a clue.
Obama mentions tax reform. But not as you or I would understand it. When most speak of tax reform they’re talking about lowering the rates and broadening the base. That’s not at all what Obama is talking about. Tim Carney analyzes that:
For Obama, there are no rate cuts — in fact, there are rate increases. But more revealing, the only "loopholes" he wants to kill are those with which he disagrees.
Obama has created dozens of tax credits and tax deductions aimed at shaping the economy in his image. Obama’s supposedly "serious" talk about the deficit never proposed to eliminate his own tax credits. He also never touches other tax credits that reward the behaviors he likes, even at the expense of the economy and tax revenue — like the ethanol-blending credit.
Obama clearly sees the tax code not simply as a way to collect revenue, but as a way to modify behavior. The only "loophole closing" he has proposed in recent months is even more discriminatory than the loophole itself: Obama doesn’t want to end the "production tax credit" that applies to coal mining, manufacturing, forestry, and oil and gas drilling — he just wants to kick oil companies out of the club that benefits from this tax credit.
He certainly isn’t proposing an end to tax credits for wind and solar energy or electric cars. These are the "investments" that will help us "win the future."
Maintaining and expanding such favoritism in the tax code — and he’s certain to insist on new and extended tax credits next year — is the opposite of "reform." But using words to mean something they’ve never meant before is standard fare for this administration.
On that score, Obama deliberately conflated spending and tax breaks Wednesday. He called for us to "reduce spending in the tax code."
While "spending in the tax code" might sound odd, it actually exists. For instance, the "Investment Tax Credit" for renewable energy is available to corporations even if they owe no taxes, and is often paid in the form of a check from the U.S. Treasury to those companies that are doing what Obama wants them to do. The Earned Income Tax Credit is the poor-man’s version of this — a welfare payment from the Internal Revenue Service.
But Obama wasn’t talking about eliminating these "tax expenditures." When he spoke of lowering "spending in the tax code," it was in the context of his desire to raise rates for upper-income Americans. Under Bill Clinton, the top tax rate was 39.6 percent, but today it’s 35 percent. That extra 4.6 percent of income that a successful American gets to keep — to Obama that counts as "spending" by the government.
The only way to understand the continued attack on the rich by this administration is found in Carney’s last line – “Obama … counts that as “spending” by the government”. It’s a premise as old as autocratic rulers everywhere – everything belongs to the sovereign (king, state, dictator) and you’re allowed to keep what the sovereign allows you to keep by his or her grace and benevolence.
Taxes should fill a single function – provide the revenue necessary to fund a Constitutional government. What it shouldn’t be is a method of granting favors or “modify behavior”. But that’s precisely what ours has become. Obama is fine with that.
That brings me to the throw away line of the entire speech:
More than citizens of any other country, we are rugged individualists, a self-reliant people with a healthy skepticism of too much government.
Not if this guy and the left have anything to do with it. In fact Obama spends the entire speech telling us why we’re not self-reliant and need government to save us from ourselves and help us throughout our lives.
It is the usual double-talk combined with classic liberal ideology that says government should play a major role in all our lives and we must make the sacrifices necessary (and collectively) to enable the vision the anointed have set out for us.
Anything else is, well, “un-American”.
Something to keep in mind when President Fiscal Responsibility lectures us all tonight on how important fiscal discipline is and how it is a priority of his to reduce the deficit and debt.
The US budget deficit shot up 15.7 percent in the first six months of fiscal 2011, the Treasury Department said Wednesday as political knives were being sharpened for a new budget battle.
The Treasury reported a deficit of $829 billion for the October-March period, compared with $717 billion a year earlier, as revenue rose a sluggish 6.9 percent as the economic recovery slowly gained pace.
2011 spending isn’t something he “inherited”. It’s his. And the budgets he previously laid out for the next 10 years are not deficit or debt reducing budgets by any stretch.
As we know, last year’s deficit was in the $1.4 trillion range, much closer to the CBO estimate than the White House fantasy. Same with ‘09. Sod disregard the White House spin and go with the CBO’s 2 year track record of being pretty much on the money – no pun intended.
Also note that the deficit is supposed to be under a trillion dollars this year and supposedly hits its lowest point when? Why election year of course. Then it again steadily builds as ObamaCare relentlessly kicks in, approaching a trillion dollars again in ‘19.
This is the White House projected budgets, folks. This is what they see us spending, or plan on anyway. But tonight we’re going to be treated to a “major speech” by the architect of this mess telling us how concerned he is with the deficit and how important it is to him to address it.
Print this chart and keep it handy when he presents his spin.
Oh, by the way, remember the campaign promise to cut the deficit in half by the end of his first term? You didn’t know at the time that $800 billion in the hole would do the trick did you? You didn’t know he planned on a deficit of $1.8 trillion did you?
Tomorrow night President Obama will address the nation in an “important” speech – or is it “major” speech – about how he thinks we ought to cut both the deficit and the debt.
Clue: It involves raising taxes.
Yeah, the backhanded way of saying, “our problem is one of not enough revenue instead of too much spending”. And how does the President plan on selling this? Well if his spokesman, Jay Carney is to be believed, an old bromide is the answer:
“You can’t — you can’t simply slash entitlements, lower taxes and call that a fair deal.”
“Everyone,” he said, must “share in the burden of bringing our fiscal house into order.”
You could spend all day on those two sentences alone. Yes, Mr. Carney and Mr. Obama, you can “simply slash entitlement, lower taxes and call that a fair deal”. Despite rhetoric to the contrary, our problem is growing government and out of control spending. Slash both the size of government and severely limit its ability to spend more than it takes in and you’ve taken a major step in “bringing our fiscal house into order”. That’s what’s fair.
But of course, that assumes you don’t by the implication that this problem we suffer under is one of all our making. Because if you do, then you buy into the assumption that we must all “share in the burden” of fixing it. No sale here.
First, we don’t all agree that it in order to fix what profligate and incompetent legislators have done over the years we must give them more money to waste.
No matter how many times they say it, it doesn’t make it right. They have more than enough revenue to properly fund the Constitutionally mandated government. What they don’t have enough revenue to continue carrying on is the extra-Constitutional nonsense called entitlements. That means entitlements must be “slashed” to the point that they’re self-sufficient and don’t add to either the deficit or the debt. Additionally, once those are addressed, government should be trimmed of all the bureaucratic fat it has built up over the decades. If there’s a problem with morbid obesity in this country it is found in the size of government.
Oh, and don’t forget that the guy who is going to lecture us about fiscal responsibility on Wednesday night has doubled the debt and is running a deficit this year over a trillion dollars (drinking game – knock it back every time he pawns all of that off as an “inherited” problem), not to mention adding a huge new … entitlement program.
The budget deal just negotiated take a first tentative swipe at the size of government. No, it’s not what I’d prefer, but then given what it could have ended up being, I’ll take it. Here’s a rundown of some of the cuts. Ed Morrissey has a few more:
The CR terminates funding for more than 55 programs, for a total savings of well over $1 billion. In addition, the bill terminates two programs funded in ObamaCare (the Consumer Operated and Oriented Plan (CO-OP) and the Free Choice Voucher programs).
The CO-OP, according to some critics, is nothing more than a stealth public option. But to the point – 55 programs is 55 programs. We could probably easily eliminate 5,500, but that’s not the point at the moment – a journey of a 1,000 miles begins with the first step in that direction. That’s what this should be considered and we need to encourage (and reward) this sort of thinking and action.
Another I like:
The legislation also eliminates four Administration “Czars,” including the “Health Care Czar,” the “Climate Change Czar,” the “Car Czar,” and the “Urban Affairs Czar.”
That’s why you have Department Secretaries, although I’d love to see some of the departments eliminated as well. Speaking of those Departments:
- Agriculture: $3 billion cut from FY10 level, $3.2 billion less than Obama budget request
- Commerce/Justice/Science: $10.9 billion cut from FY10 level, $7.1 billion less than Obama request
- Defense: $5 billion increase from FY10
- Energy/Water: $3.6 billion cut from FY10, $1.7 billion less than Obama request
- Financial Services: $2.4 billion cut from FY10, $3.4 billion less than Obama request
- Homeland Security: $0.784 billion cut from FY10, $1.9 billion below Obama request
- Interior: $2.62 billion cut from FY10, $2.8 billion below Obama request
- Labor/HHS/Education: $5.5 billion cut from FY10, $13 billion below Obama request
- Legislature: $0.103 billion cut from FY10
- Military Construction/Veterans Affairs: $0.6 billion increase over FY10, $3.4 billion more than Obama request
- State/Foreign Operations: $0.504 billion cut from FY10, $8.4 billion below Obama request
- Transportation/HUD: $12.3 billion cut from FY10, $13.2 billion below Obama request
Like I said a first tentative step, but definitely a step in the right direction.
Meanwhile, I just can’t wait to hear what Mr. Deficit Hawk has to say Wednesday night. In a sad sort of way, it ought to be a howler.
The averted government shutdown in which the budget for the remainder of 2011 has apparently been agreed too with $38.5 billion in spending cuts is better than one with no spending cuts, obviously.
But we should keep the cuts made in context, because what is happening right now, beside the caterwauling by the left about grandma and cat food, is the ship of state is still filling with the water of increased debt faster than we can bail. The context?
The federal debt increased $54.1 billion in the eight days preceding the deal made by President Barack Obama, Senate Majority Leader Harry Reid (D.-Nev.) and House Speaker John Boehner (R.-Ohio) to cut $38.5 billion in federal spending for the remainder of fiscal year 2011, which runs through September.
Yes, praise indeed for persevering and getting some manner of cut out of this deal with Democrats fighting the Republicans every step of the way. Lord knows if the Democrats had actually passed a budget last year we wouldn’t even see the cuts they got. And keep in mind that we’re talking about the rest of the year’s discretionary spending for the most part – entitlements can’t be cut until and unless the laws controlling them are addressed and that won’t be until later on in this year.
Also remember, what you’re witnessing here is a mere skirmish. The “war” comes when the president’s budget meets the Republican House’s budget (with the Senate thrown in to completely confuse the situation). The real war takes place with the 2012 budget.
So for those hollering that the GOP should have gotten more, I’m not so sure that’s a useful argument at the moment. The fact that they’re in a mode to cut and have done so in this rump year “budget” where they can only have an effect on part of the spending is laudable. Personally I think it is more important to make that point than to worry about how much we’d prefer they cut. We need to keep them in that cutting mode and get the American people used to it (and on-board) as well.
The GOP also needs to get their message out there in a way which helps the American people understand the critical nature of cutting spending to our future long term solvency as well as getting government back under control and out of areas in which it doesn’t belong. Believe it or not, numbers like the above help make that case. Instead of using them as a downer, they help illustrate the problem and which side abets that problem.
Numbers like those above are startling for most – their usefulness can’t be overstated. It puts an exclamation point on the argument Republicans have been trying to make. As hard as the GOP had to work to wring that $38.5 billion out of the spending spree this administration is on, it still managed to spend more than was saved and add to the debt.
There’s a campaign advert in there somewhere.
If you thought President Obama was serious about his rhetorical appeals to fiscal responsibility, one only has to look at the latest CBO report to know better. There is nothing in the report to support any such contention by the administration. To the contrary it points to a level of fiscal irresponsibility that is unprecedented in the history of this republic. Obama’s budget would, if executed, double the public debt by 2021 to $20.8 trillion or 87% of the GDP. That is if our economic and financial systems, not to mention the dollar, last that long:
In 2012, the deficit under the President’s budget would decline to $1.2 trillion, or 7.4 percent of GDP, CBO estimates. That shortfall is $83 billion greater than the deficit that CBO projects for 2012 in its current baseline. Deficits in succeeding years under the President’s proposals would be smaller than the deficit in 2012, although they would still add significantly to federal debt. The deficit would shrink to 4.1 percent of GDP by 2015 but widen in later years, reaching 4.9 percent of GDP in 2021. In all, deficits would total $9.5 trillion between 2012 and 2021 under the President’s budget (or 4.8 percent of total GDP projected for that period)—$2.7 trillion more than the cumulative deficit in CBO’s baseline. Federal debt held by the public would double under the President’s budget, growing from $10.4 trillion (69 percent of GDP) at the end of 2011 to $20.8 trillion (87 percent of GDP) at the end of 2021.
Given the outright deceit we’re regularly treated too by Democrats concerning their seriousness in addressing the problems we face, or their outright disinterest in actually doing so (Harry Reid’s recent “see me in 20 years about Social Security” or his whining about defunding “cowboy poets”), it shouldn’t really surprise anyone that we’re in the shape we’re in or that this administration is actually offering these budgets on the one hand while claiming to understand that we can’t continue spending as we are on the other.
We even have Nancy Pelosi claiming Democrats have always been for fiscal responsibility.
It boggles the mind to even consider these numbers and yet we have an administration offering them as the way to go for the future and doing so with a straight face.
Note the chart included here. The “baseline projection” is what we’d spend under current law. CBO claims one of the problems is a decrease in revenues under the President’s proposed policies with, you guessed it, an increase in outlays. And we’d also see – and this isn’t unexpected at all, given the amount of money we continue to borrow – an increase in the percentage of outlays required to service the debt:
In particular, net interest payments would nearly quadruple in nominal dollars (without an adjustment for inflation) over the 2012–2021 period and would increase from 1.7 percent of GDP to 3.9 percent. Total outlays under the President’s budget would equal 23.6 percent of GDP in 2012, decline slightly as a share of GDP over the following two years, and then rise for the rest of the 10-year projection period. They would equal 24.2 percent of GDP in 2021—about 0.3 percentage points above CBO’s baseline projection for that year and well above the 40-year average for total outlays, 20.8 percent.
So if the President’s budgets were enacted, we’d see government outlays – that’s spending for the rest of us – hit almost a quarter of the GDP and the debt in total about 87% of GDP in 10 years.
Meanwhile Democrats continue to fight against almost every cut for the most inane reasons while we see the debt numbers continue to climb. Republicans are at least are making an attempt at cutting spending, no matter how weak, but Democrats have given up all pretense. And all credibility. The President’s budgets are the final nail in the Dem’s faux “fiscal responsibility” coffin.
I keep finding indications that the answer is no.
Well here’s a good example. Presently Republican in the House are fighting Democrats about trimming $6 billion dollars from a continuing resolution which would fund government for 3 more weeks (the CR is necessary because Democrats failed to do their most basic job in Congress when they were in the majority – pass a budget).
$6 billion dollars (which Rand Paul says is about 1.2 days of government spending).
Anyone know what happened Tuesday of this week?
Tuesday we added an additional $72 billion to the debt. You do the math. If the GOP is successful in removing $6 billion every three weeks for the remaining 36 weeks of the budget cycle, how much will they have cut?
In essence, zero. They will have only matched the amount added to the debt on Tuesday. And I hate to be the bearer of bad news, but there are a bunch more “Tuesdays” coming in the remaining fiscal year. So even with the cuts the GOP is attempting, they’re not even at the “treading water” level and are being fought every step of the way.
Right now our debt totals $14.2379 trillion ($14,237,952,276,898.69) an increase of $676.3 billion since October of last year.
As CNS reports:
Congress would need to cut spending by $6 billion every three weeks for approximately the next six and a half years (338 weeks) just to equal the $676.3 billion the debt has increased thus far this fiscal year.
Just makes you shake you’re head in profound dismay, doesn’t it? What in the freakin’ hell do we have to do to get it across to these people that they have to stop this stuff?
It is sort of surprising that it is even necessary to put this up, but as most of us know, people pay more attention to visual evidence than written. And written is sometimes open to misinterpretation. I challenge anyone to misinterpret this:
If the US were a business, this would be it’s “Income Statement”. And this isn’t a one time “it’ll get better next year” sort of statement either. Neither income nor spending are projected by the administration to be much different in its 10 year budget projections.
Note where 58% of the spending comes from. Do your own calculations -the most simple, of course is taking $2.2 trillion from $3.5 trillion and understanding that you have a shortfall of S1.3 trillion.
The chart comes from a very interesting report from a financial analyst at KPCB, Mary Meeker. She takes a look at the US’s finances as if the country was a business. Business Insider (HT: Pundit Review) lays out some of the gory details and what is discussed in the report as recommendations:
• Spending as a percent of GDP rose 3 percent each year from 1790 and 1930. Worse: It rose 24% in 2010.
• Debt levels will be three times current levels by 2030. Entitlements and interest alone will exceed total revenue by 2025.
• Only 1 in 50 Americans needed Medicaid when it was first created in 1965, 1 in 6 Americans receives Medicaid now.
• Extended unemployment benefits could set back America Inc. $34 billion in the next two years alone.
• The only good investments: technology, education and infrastructure.
• The crucial reforms: entitlement and tax policies
• There is no quick-fix to America’s deficit problem. While raising taxes could help, the only real solution is cutting costs.
• Why we should cut Medicare benefits by 53%
• Why we should increase the retirement age to 73 or cut Social Security benefits by 12%.
Emphasis mine. Essentially the ground truth about the country’s financial situation is the only way to get it in order is to commit to massive cuts in spending. Superfluous to that argument is any argument claiming certain programs or government departments or any other aspect of government should be exempt. That said, it is clear to anyone with eyes that the major problem lies in too much spending for entitlements. For instance how is it a program that was designed to fund medical care for the poor in this country and when started had 1 in 50 Americans enrolled now enrolls 1 in every 6 Americans? My guess is you’ll find the same to be true of most so-called “anti-poverty” programs today.
And the billions upon billions we throw at education through the Dept. of Education which hasn’t raised the yearly results of our students one iota since its inception. Or the Department of Energy – created in Jimmy Carter’s day to do what? Lessen our dependence on foreign oil. That’s worked well hasn’t it?
We’re talking drastic action here, folks. And we’re talking getting a grip and facing reality – not this “hey, make cuts but don’t touch our entitlements” nonsense that some polls reflect. Nor can these cuts fall victim to whining by special interests. And it would be wonderful, in an obvious era of austerity, if the White House could manage a little leadership as well:
Last July, Obama announced that he wanted federal workers to cut down on business travel and commuting by car in order to reduce emissions produced by the federal government:
The White House was announcing Tuesday that the government will aim to reduce carbon dioxide and other greenhouse gas emissions from indirect sources like employee driving by 13 percent in 2020, compared with 2008 levels.
That’s for everyone else. The Obama’s of course, are exempt from such things and as an example, fly in their personal trainer every week for a workout. Imagine the reduction in emissions if they were to actually practice what they preach and hire a local personal trainer.
Pulling it all together, this is the problem we face in getting the country’s house in order. Those that are talking about (and actually trying) cutting spending are now cast as bad guys. Special interests are spooling up their sob stories. The bureaucracy is beginning to fortify the walls around its huge and expensive kingdom. And much of the public wants cuts without pain. Meanwhile, other than lip service, the so-called leadership of this country doesn’t seem to understand what leadership is, what it entails and why it is important to set a good example – that is if they’re actually serious about doing what they claim we must do.
If this were a company, as Mary Meeker lays out in her study, investors would be cashing out as quickly as they could and others would be avoiding anything to do with this wreck. The bottom line of Meeker’s report is the road down which we’ve kicked the can for decades has come to a dead-end. We’re there. We can’t kick it one single foot further.
The time has finally come and the question is, are we up to the task at hand? Do we have the political will and leadership necessary to get done what must be done? Unfortunately, I don’t think so – financially speaking and addressing the quality of leadership available, the election of the empty suit in the White House couldn’t have come at a worse time.
There are at least two ways this crisis will be solved. Deliberately through tough and painful measures enacted by a leadership that directly confronts the problem and makes tough choices, or spontaneously when we reach a tipping point and everything collapses in a heap and we’re left surveying the ruins and wondering what happened.
Any guess as to which scenario I think is most likely?