As the world collapses around us, our borders are overrun, our leaders dither and procrastinate and the world in general thumbs their collective noses at “American power”, this sort of stuff could get lost in the shuffle:
When President Obama took office on Jan. 20, 2009, the total federal debt was $10,626,877,048,913.08. As of the close of business on July 30, 2014, it had risen to $17,618,599,653,160.19–up $6,991,722,604,247.11 from Obama’s first inauguration day.
By the close of business on July 31, 2014, it had risen to $17,687,136,723,410.59—up $7,060,259,674,497.51 since Obama first inauguration day.
Now the easy thing to do would be to go on a “it’s Obama’s fault” tirade, but that would only be partially true. He certainly holds some responsibility for doing nothing to stem the red ink, and, in most cases, actually encouraging it. He’s certainly exerted no leadership in trying to get the two parties together on a budget either.
But it is Congress that appropriates and spends. Not the executive branch, now matter how bad it is. For the first two years of Obama’s first term, it was all Democrats all the time. And they set in motion horrendous spending programs like ObamaCare. And there were a number more.
The fact of the matter is Congress also holds major share of the blame for this – no budget has been passed by the Senate during Obama’s entire tenure – and again, the majority of the Senate has been Democrat for these 6 years.
So what had been a horrific 10 plus trillion debt that was piled up over 40 years, became an even more horrific 17 trillion dollar debt in 6 short years – with no end in sight.
Yet most of the idiots who’ve put us in this fiscal hole will be running for re-election in the midterms and most of them will be re-elected.
Once more, the definition of insanity seems to loom large, doesn’t it?
CBO has extrapolated the budget for the government out to 2039 and using current law paint a picture of the same old crap with a continuing rise in public debt:
Note that the spending an revenue lines are essentially as close as they’re going to get this year, with spending outpacing revenue and widening the gap from now on.
Oh, and this little goodie:
- Federal spending for Social Security and the government’s major health care programs—Medicare, Medicaid, the Children’s Health Insurance Program, and subsidies for health insurance purchased through the exchanges created under the Affordable Care Act—would rise sharply, to a total of 14 percent of GDP by 2039, twice the 7 percent average seen over the past 40 years. That boost in spending is expected to occur because of the aging of the population, growth in per capita spending on health care, and an expansion of federal health care programs.
So much for “and we’ll save every family $2,500 a year on their health care insurance”. Costs aren’t going anywhere but up. Of course, you can count on the propagandists to now claim they’ll be going up slower than had they let the market work. As with most of the “facts” these yahoos throw around, it will be a baseless claim meant to excuse their failure.
And as the debt piles up even more, so does the amount of money it takes to pay the interest:
- The government’s net interest payments would grow to 4½ percent of GDP by 2039, compared with an average of 2 percent over the past four decades. Net interest payments would be larger than that average mainly because federal debt would be much larger.
No kidding. Which means:
- In contrast, total spending on everything other than Social Security, the major health care programs, and net interest payments would decline to 7 percent of GDP by 2039—well below the 11 percent average of the past 40 years and a smaller share of the economy than at any time since the late 1930s.
Can anyone yet guess the solution to this problem? That’s right, is some form or another, a tax increase. One of the reasons a carbon tax is so popular among some politicians is it taxes thin air and creates a revenue stream out of it.
This is the continuing situation the incompetents who run this government (and yes that includes both parties) have managed to produce for this once proud nation. A debtor nation which is slowly dying under the weight of its own debt, brought to us by spendthrift politicians who will all deny they’re the problem.
But that single picture tells a different story doesn’t it?
Here’s our future:
- The large amount of federal borrowing would draw money away from private investment in productive capital in the long term, because the portion of people’s savings used to buy government securities would not be available to finance private investment. The result would be a smaller stock of capital and lower output and income than would otherwise be the case, all else being equal. (Despite those reductions, the continued growth of productivity would make output and income per person, adjusted for inflation, higher in the future than they are now.)
- Federal spending on interest payments would rise, thus requiring higher taxes, lower spending for benefits and services, or both to achieve any chosen targets for budget deficits and debt.
- The large amount of debt would restrict policymakers’ ability to use tax and spending policies to respond to unexpected challenges, such as economic downturns or financial crises. As a result, those challenges would tend to have larger negative effects on the economy and on people’s well-being than they would otherwise. The large amount of debt could also compromise national security by constraining defense spending in times of international crisis or by limiting the country’s ability to prepare for such a crisis.
I’d like to say this is astonishing, and it would be if a Republican was in the White House because our press would make it so. But with Obama? Meh:
“President Obama said that increasing the debt limit does not increase the debt,” the minority side of the Senate Budget Committee says in a statement. “But when the Treasury department started using so-called extraordinary measures to avoid a breach of the debt ceiling in May, 2011, the debt limit stood at $14,294 billion.
“Today it stands at $16,699 billion, which was reached when Treasury started using extraordinary measures in May of this year. That’s a $2,405 billion increase in 2 years.
“Meanwhile, the economy, as measured by GDP only increased by $1,199 billion between the second quarter of 2011 and the second quarter of this year.
“So the debt increased twice as much as the economy over the last two years, the very definition of unsustainable. The growth of a nation’s debt cannot for long exceed the growth of its economy – which is precisely what is happening now.”
If you need a picture, try this:
And, of course, they’re asking for more. So here’s the question: If we give them more, what will they want next? Answer: Why more, of course.
So at some point, you have to say “no” don’t you?
Well common sense says you do, but apparently for this crowd, that sense isn’t at all that common.
So we do the circus thing, year after year after year and we build charts like this?
Hell, that’s the chart of a 3rd world country.
And the word that should be plaster across the top of it is “unsustainable”.
Meanwhile, in DC, they continue to wrangle over more debt.
And while I have your attention, Bill Quick is doing one of his very infrequent fund-raisers. Give him a hand if you can. Besides being one of the strongest voices for liberty on the Interwebs, he also loves Dale’s auto reviews.
Zero Hedge has a very pointed article about Detroit’s decline. In it are listed 25 reasons it’s bankrupt (that, as ZH claims, will leave you shaking your head when you finish). Here are the first 12:
1) At this point, the city of Detroit owes money to more than 100,000 creditors.
2) Detroit is facing $20 billion in debt and unfunded liabilities. That breaks down to more than $25,000 per resident.
3) Back in 1960, the city of Detroit actually had the highest per-capita income in the entire nation.
5) Between December 2000 and December 2010, 48 percent of the manufacturing jobs in the state of Michigan were lost.
6) There are lots of houses available for sale in Detroit right now for $500 or less.
7) At this point, there are approximately 78,000 abandoned homes in the city.
8 ) About one-third of Detroit’s 140 square miles is either vacant or derelict.
I know, you look at that and say, "these have me shaking my head already … there’s more"? Oh, yeah. Read ‘em all. But here’s the important part. It’s not just Detroit:
9) An astounding 47 percent of the residents of the city of Detroit are functionally illiterate.
10) Less than half of the residents of Detroit over the age of 16 are working at this point.
11) If you can believe it, 60 percent of all children in the city of Detroit are living in poverty.
12) Detroit was once the fourth-largest city in the United States, but over the past 60 years the population of Detroit has fallen by 63 percent.
“Oh my”, you’re saying, “I’m already shaking my head. There’s more”? Oh, yeah, much more.
But here’s the important part – a part we’ve been talking about for quite some time”
A while back, Meredith Whitney was highly criticized for predicting that there would be a huge wave of municipal defaults in this country. When it didn’t happen, the critics let her have it mercilessly.
But Meredith Whitney was not wrong.
She was just early.
Detroit is only just the beginning. When the next major financial crisis strikes, we are going to see a wave of municipal bankruptcies unlike anything we have ever seen before.
And of course the biggest debt problem of all in this country is the U.S. government. We are going to pay a great price for piling up nearly 17 trillion dollars of debt and over 200 trillion dollars of unfunded liabilities.
All over the nation, our economic infrastructure is being gutted, debt levels are exploding and poverty is spreading. We are consuming far more wealth than we are producing, and our share of global GDP has been declining dramatically.
We have been living way above our means for so long that we think it is "normal", but an extremely painful "adjustment" is coming and most Americans are not going to know how to handle it.
I agree completely. As I said in my first post about Detroit it is just the dead canary in the debt mine. It was simply the worst off of the bunch. But, remember, we were told this sort of stuff couldn’t happen and to quit worrying about. That debt wasn’t really that important. Well, in a microcosm, Detroit is the end state we can expect for any number of governmental units in this country (and others). It is where everyone is headed, it’s just a matter of the speed in which they get there.
You cannot live as we’ve been living and expect there to be no consequences. Let me modify that. You can “expect” whatever you wish, what’s delivered will be delivered by reality, not your expectations.
Apparently President Obama is sure his newest budget proposal is so good there’s no room or need for negotiation. Or so a senior White House official says:
“We don’t view this budget as a starting point in the negotiations. This is an offer where the president came more than halfway toward the Republicans,” a senior administration official told reporters Tuesday, speaking on condition of anonymity to detail the forthcoming document.
“So this is our sticking point,” the official said. “And the question is: are Republicans going to be willing to come to us to do serious things to reduce our deficits?”
Obama is proposing a $3.78 trillion dollar budget. Estimated tax revenues for 2014 are $3.22 trillion. Yet, this is being touted as a “budget cutting” budget and the White House claims it is exactly what the Republicans have wanted.
What … another deficit?
By the way, I don’t want “reduced deficits”. I want NO deficit. I.e. any budget that begins with an amount higher than the estimated tax revenues for the year is Dead On Arrival.
And that’s precisely the declaration this budget (like all the other budgets Obama has submitted) deserves.
Because of their false agenda, that’s why. They’re still convinced that, despite 17 years of no warming (as recently admitted by the head of the IPCC), oil is bad and “green” is good and that they’re doing something to save the world. Disregard the fact that green is still unviable. Disregard the fact that everywhere it has or is being pushed, energy costs are skyrocketing. Nevermind the fact that we are sitting on a sea of fossile fuel products that we only need to access. Screw the fact that science can find no discernable warming. Their minds are made up.
That said, there’s also the fiscal side of the house. The debt. The deficit. And the demand by Democrats to raise more revenue.
Unfortunately, because of their agenda, they’re likely to completely screw up a golden opportunity to bring in much more revenue and drive energy prices down, because their agenda is against fossile fuel. And we all know the party agenda comes before what is best for the country.
Enter the administration with a renewed plan to tax oil companies instead of opening access to the vast natural riches we enjoy. The result? Well this chart will help you comprehend the vast differences in the two policy choices (full size here):
So the either/or is “tax ‘em or open access”. The difference:
According to a 2011 study by Wood Mackenzie, increased oil and natural gas activity underpro-access policies would generate an additional $800 billion in cumulative revenue for government by 2030. The chart puts into perspective the size of these accumulating revenues – enough to fund entire federal departments at various points along the timeline. By contrast, Wood Mackenize also found that hiking taxes on oil and natural gas companies would, by 2030, result in $223 billion in cumulative lost revenue to government.
It only proves the old saw -”If you want more of it, reward it and if you want less, tax it”. Think about it – money to help run government and pay down the debt (not to mention the thousands, if not millions of jobs created) being passed up in the name of false science and agenda politics.
Meanwhile, we’ll be left in the cold and the dark, thanks to agenda driven policies with no foundation in reality.
The more I see politics of today the more I think George Orwell simply listed by about 30 years. Imagine a politician a few decades ago trying to make this argument and then calling the other guy’s argument “absurd”.
“While I’m willing to compromise and find common ground over how to reduce our deficit, America cannot afford another debate with this Congress over how to pay the bills they’ve already racked up,” Obama said in the East Room of the White House at what aides have billed as the final news conference of his first term. “To even entertain the idea of this happening, of America not paying its bills, is irresponsible. It’s absurd.”
But the problem is, thanks to both Congress and this administration, we are not paying our bills. We’re borrowing money that we don’t have and have been spending it. I find it ironic, that the president who has run up the largest deficit in history is talking about being irresponsible.
And then, there’s this:
“They will not collect a ransom in exchange for not crashing the American economy,” Obama said. “The full faith and credit of the United States of America is not a bargaining chip.”
But that is precisely what Obama is doing, using the credit rating of America as a bargaining chip – to justify more spending on credit. No irony there. Interesting that Obama is suddenly concerned about “not crashing the American economy” when his profligacy has put us in a position we are in today.
“The issue here is whether America pays its bills,” Obama said. “We are not a deadbeat nation.”
Yes we are. He just doesn’t know it yet, or at least won’t admit it. And much of the cause rests with him as signified by his absurd argument.
In the Telegraph today, Janet Daley tries to explain the same thing I’ve been trying to explain here for, well, years.
Any political leader prepared to deceive the electorate into believing that government spending, and the vast system of services that it provides, can go on as before – or that they will be able to resume as soon as this momentary emergency is over – was propelled into office virtually by acclamation.
So universal has this rule turned out to be that parties and leaders who know better – whose economic literacy is beyond question – are now afraid even to hint at the fact which must eventually be faced. The promises that governments are making to their electorates are not just misleading: they are unforgivably dishonest. It will not be possible to go on as we are, or to return to the expectations that we once had. The immediate emergency created by the crash of 2008 was not some temporary blip in the infinitely expanding growth of the beneficent state. It was, in fact, almost irrelevant to the larger truth which it happened, by coincidence, to bring into view. Government on the scale established in most modern western countries is simply unaffordable. In Britain, the disagreement between Labour and the Conservatives over how to reduce the deficit (cut spending or increase borrowing?) is ridiculously insignificant and out of touch with the actual proportions of the problem.
Just as our debate here on what constitutes a "balanced approach" to cutting the deficit. The truly silly part of that debate is the demand that "the rich" pay more in taxes, as if that money would somehow close the gap in financing the welfare state. In France, the government wants a 75% tax rate, but…
Barack Obama knows that a tax rise of those proportions in the US would be politically suicidal, so he proposes a much more modest increase – an income tax rate of around 40 per cent on the highest earners sounds very modest indeed to British ears. But that is precisely the problem. If a tax rise is modest enough to be politically acceptable to much of the electorate, it will not produce anything like enough to finance the universal American entitlement programmes, social security and Medicare, into a future with an ageing population. There is no way that “taxing the rich” – that irresistibly glib Left-wing solution to everything – can make present and projected levels of government spending affordable.
Right now, mandatory entitlement spending alone is 62% of the Federal budget, and it will rise continuously under present law. At the same time, federal revenues don’t even cover the cost of those entitlements, plus interest payment on the national debt.
Think about that. We could eliminate the entire Federal Government except for entitlement spending and interest on the national debt, and we would still have to borrow money to pay for it.
The president’s proposal for increasing taxes on "the rich" would bring in an extra $40 billion dollars next year. So, instead of borrowing $1.1 Trillion next year, we’ll only have to borrow $1.06 Trillion. Somehow, we are told, this will be massively helpful.
Meanwhile, if interest rates return to their historic average levels the cost of debt service alone will rise from $250 billion per year to $750 billion per year.
But, really, anyone who isn’t as dumb as a bag of hammers already knows that the amount of government we have is unaffordable, simply by noting that we’ve increased the national debt from $1 trillion to $16.3 trillion since 1980. It took us 190 years to accumulate $1 trillion in debt. And 32 years to multiply it more than 15 times.
We have three choices. We can cut all Federal spending by half. We can have massive tax increases on the middle class. We can do nothing and eventually default/hyperinflate our monetary and financial system away.
Based on the politics of 2012, I assume it will be the latter.
Here’s a picture:
Maybe that will help.