Bad Math, Worse Economics

Today's blog will cover some depressing math numbers. As pointed out in the book in several places, the government never pays for anything. Just about everything the political class spends comes out of your pockets and my pockets. The myth that "government will pay for it" is just that, a myth. We all pay for it although our expenditures are camouflaged by "government programs".

A few examples will make you realize how badly we are being treated as the wealth creators in this country. According to the White House website, www.whitehouse.gov, on April 20, 2009 President Obama told his Cabinet to crack down on spending and find at least $100 million in savings. Around the same time he was submitting a record budget to Congress which was about $3.55 trillion. Since there is about 130 million households in the country today, if Obama actually found $100 million in savings, each US household would see a savings of about $.77 (that's 77 cents).

Another approach would be to compute how much of a percentage saving $100 million is to Obama's budget. If we divide his proposed savings by his budget number we get a savings of .0028%. Since the average US household annual income level is about $50,000 (Census Bureau as of 2007), if the average American family reduced their spending by the same percentage, the annual "hardship" they would incur comes to about $1.40. Thus, Obama wants to reduce spending by the equivalent of one Sunday newspaper purchase.

In both cases it is pretty obvious that this administration is not serious about reducing the size of government and allowing us to keep our hard earned wealth and tax dollars. The $100 million number is a joke no matter how you look at it, it is less than a trivial amount. Washington obviously does not get it like readers of "Love My Country, Loathe My Government" get it. As outlined in the first few steps in the book, significant and deep (50%) spending cuts need to be made in the size of government in order to keep the nation and its citizens financially solvent. $100 million is not a cost savings, it is a bad public relations stunt.

A few more examples to show you how insignificant the savings of $.77 or $1.40 are. Congress is about to expand the infamous "Cash For Clunkers" program, the program where car buyers can get up to $4500 from the government if they trade in an old, low mileage car for a new, higher mileage car, so that the total program cost will now be $3 billion. This is supposed to stimulate the economy. Given that there are about 130 million households in the country, each of our families is contributing about $23 to the program, immediately wiping out our $.77 savings. I think it would have been better for us all to keep our $23 and stimulate the economy in our own way (it's called freedom) rather than being coerced into giving up $23 for some stranger to get a new car.

One last example. According to The Week magazine, the political class has incurred potential liabilities of $8.5 trillion by pledging to financially support and bailout various government agencies (e.g. Fannie Mae and Freddie Mac), insurance companies (e.g. AIG), banks (Citicorp, Bank Of America) and others. Using the same 130 million household number above, the political class has put each American family on the hook for up to $65,400 in liabilities. Kind of wipes out that $.77 that Obama is looking for!

Downsize government now as outlined in our fifty steps and stop this math and economic insanity.