How Does Anyone Who Passed Their Third-Grade Math Test Not Get This?
We're spending far more than we have. Way, way, way, way, way more. And then some. This is a problem. Possibly one that will lead to our country's demise, and some pretty horrific times on the way.
The WSJ lays out the national debt situation in an op-ed by George P. Shultz, Michael J. Boskin, John F. Cogan, Allan H. Meltzer and John B. Taylor, all now senior fellows at Stanford's Hoover Institution. It's rightly titled -- "The Magnitude of the Mess We're In":
Did you know that annual spending by the federal government now exceeds the 2007 level by about $1 trillion? With a slow economy, revenues are little changed. The result is an unprecedented string of federal budget deficits, $1.4 trillion in 2009, $1.3 trillion in 2010, $1.3 trillion in 2011, and another $1.2 trillion on the way this year. The four-year increase in borrowing amounts to $55,000 per U.S. household.The amount of debt is one thing. The burden of interest payments is another. The Treasury now has a preponderance of its debt issued in very short-term durations, to take advantage of low short-term interest rates. It must frequently refinance this debt which, when added to the current deficit, means Treasury must raise $4 trillion this year alone. So the debt burden will explode when interest rates go up.
The government has to get the money to finance its spending by taxing or borrowing. While it might be tempting to conclude that we can just tax upper-income people, did you know that the U.S. income tax system is already very progressive? The top 1% pay 37% of all income taxes and 50% pay none.
Did you know that, during the last fiscal year, around three-quarters of the deficit was financed by the Federal Reserve?
More on all the fishiness of the Federal Reserve at the link. And despite the vast depth of the hole we've let politicians dig us into, all we can do is put in a purchase order for more shovels.
The issue is not merely how much we spend, but how wisely, how effectively. Did you know that the federal government had 46 separate job-training programs? Yet a 47th for green jobs was added, and the success rate was so poor that the Department of Labor inspector general said it should be shut down. We need to get much better results from current programs, serving a more carefully targeted set of people with more effective programs that increase their opportunities.Did you know that funding for federal regulatory agencies and their employment levels are at all-time highs? In 2010, the number of Federal Register pages devoted to proposed new rules broke its previous all-time record for the second consecutive year. It's up by 25% compared to 2008. These regulations alone will impose large costs and create heightened uncertainty for business and especially small business.
This is all bad enough, but where we are headed is even worse.
President Obama's budget will raise the federal debt-to-GDP ratio to 80.4% in two years, about double its level at the end of 2008, and a larger percentage point increase than Greece from the end of 2008 to the beginning of this year.
I think the details laid out in this article show very well how utterly awful it was that Obama was focused on forcing his health care agenda on us as our economy burned -- and continues to burn.
See this and this.
Crid [Cridcomment at Gmail] at September 17, 2012 12:25 AM
I could try to do a detailed comment, but I'm just so frustrated I'm almost incoherent. The only thing I can say:
Jim P. at September 17, 2012 12:38 AM
Sometimes the math you learn AFTER the third grade is helpful too. Sometimes it leads to different conclusions than third graders will have.
Three boys are walking on railroad tracks at night and see a train headlight ahead of them. They scream and run as fast as they can towards the train. Why?
You are in a Blanik sailplane and flying at your best glide speed of 49 or so knots descending at approximate 300 feet per minute. You hit a downdraft that has you descending at 800 feet per minute. Do you A) pull the nose up and slow the aircraft down to it's minimum sink speed of 37 knots so you will descend at the slowest possible speed or do you B) push the nose down and speed the aircraft up to 65 - 80 knots even though you will start descending much faster than 800 feet per minute? Why?
jerry at September 17, 2012 4:21 AM
Somebody's program is gonna have to be cut, and deeply, too. But not mine, 'coz it's vital.
Somebody is gonna have to pay his fair share. But not me, 'coz I already have.
I wonder what the budgetary impact would be of eliminating one future aircraft carrier, and the entire F-35 program? Outside of loss of manufacturing and shipyard jobs, I mean.
Old RPM Daddy at September 17, 2012 4:28 AM
Riffing on Crid's digworthy tweet-links: What would the budgetary impact be of eliminating duplication of various government programs? Outside of making bureaucrats squeal like pigs when their troughs are snatched away, I mean?
Old RPM Daddy at September 17, 2012 4:31 AM
The 80.4% figure is such a fantasy. If you do honest accounting, the debt is much, much higher than that already. The debt is not just the total of outstanding bonds, but must also include other debts, such as federal pensions owed.
"I wonder what the budgetary impact would be of eliminating one future aircraft carrier, and the entire F-35 program?"
Almost nothing. Not that one shouldn't whack military spending as well, but the biggest expenditures are Social Security, Medicare and Medicaid. Any serious effort to reduce the deficit must must make major cuts to those programs.
Really, the federal government has no business making any sort of individual payments: no social security, no medicaid, no agricultural subsidies, no art grants, no food stamps - none of this. These may well be worthy programs, but they are programs that the states and local communities should define based on local needs.
a_random_guy at September 17, 2012 5:19 AM
So the debt burden will explode when interest rates go up.
I wouldn't worry about this. QE III is on its way, and that'll keep interest rates in check for the next several years. Yes, eventually the interest rates will go up, and it'll hurt, but the QE III has the side benefit of reducing the value of the dollar, and thus the value of the debt held.
Of course, those of us who aren't personally in debt and have money saved up are going to see the value of those saving leached away.
Is it too soon to say Dave Ramsey for President? yeah, I know, he can't afford the pay cut...
I R A Darth Aggie at September 17, 2012 7:11 AM
@jerry
The boys are in a railway tunnel and run toward the train because the entrance is close enough that they can get out before the train arrives.
Steamer at September 17, 2012 8:41 AM
Remember when Democrats and Republicans were voicing concerns about George W. Bush running budget deficits and the impact of those deficits on the national debt?
Remember how important the budget deficit and national debt were to both parties then?
Remember when, during the 2008 campaign, driving up the national debt was called "irresponsible" and "unpatriotic?"
Remember when presidents actually drafted and submitted proposed budgets to Congress and negotiated with Congress to reach a final budget for the upcoming fiscal year?
Anyone hear a Democrat voicing concern about budget deficits or the national debt today?
Conan the Grammarian at September 17, 2012 9:54 AM
That's if you believe the Budget and Accounting Act of 1921 was actually constitutional.
Article I, Section 7 of the Constitution:
Where is the president mentioned in that?
Jim P. at September 17, 2012 3:00 PM
@steamer, well I had them on a bridge, but yes.
Similarly, though it's somewhat counter intuitive if you are in a downdraft in a sailplane, push your nose forward speed up and fly out of it, and you'll lose less altitude than if you slow down to your minimum descent rate and stay in the downdraft for a longer period of time.
Lesson: not everything is linear and sometimes the obvious truths and obvious solutions aren't truths or solutions.
jerry at September 17, 2012 3:21 PM
SO I have you on record for wanting to raise taxes?
"We" spend on healthcare, regardless of whether it is us paying taxes for it, or us paying premiums for it.
Brian at September 17, 2012 3:34 PM
If I'm twenty years old with no health conditions I can take major medical, i.e. no coverage until it gets to the $20K+ range for about $10-20 a month.
Under the new rules that option is no longer there. Many colleges used to have a major medical plan available for $200-300 a year. Now it is in the $750+ range. Why? Because under Obamacare they have to cover more stuff. The insurance companies have to charge more.
So if you are a twenty something that doesn't really need healthcare, you are paying for it now. You weren't before Obamacare.
Jim P. at September 17, 2012 8:19 PM
Answer to the post-title question: There ARE no 3rd grade math tests. Some kids might do poorly and feel bad, so we just grade them by how pretty they color the numbers during art.
Shannon M. Howell at September 18, 2012 2:24 PM
Holy crap. We may have already missed the window.
Cousin Dave at September 18, 2012 5:53 PM
I have been and am buying shelf stable foods, bullets, and precious metals on a regular basis. About the only thing left to add to my stocks are heirloom seeds and toilet paper. ;-)
If Obama gets re-elected it becomes a question of whether it is a world wide recession or depression. If it is Romney, it is a world wide recession or reset and the loss of millions in equity without the fall of many governments.
Jim P. at September 18, 2012 7:59 PM
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