The Obama 5% Solution That Solves Nothing

One of my very favorite Mark Twain quotes goes something like this: "Sometimes I wonder whether the world is being run by smart people who are putting us on or imbeciles who really mean it." After reading a recent Federal government budget article that was posted on the Earthlink news page on November 13, I am still not quite sure who we are dealing with in Washington.

According to the article, the Obama administration has alerted domestic parts of the Federal government that they should plan for a budget freeze or even a five percent decrease in their budget (heavens, 5%, how will they survive!). This edict came down in an attempt to cut the deficit spending catastrophe this Congress and administration has gotten us into. It was also timed to coincide with Obama's trip to the Far East in an apparent lame attempt to convince the Chinese, the largest purchasers of America's debt, that the American political class was getting it's financial house in order.

On the same day the article appeared, the government reported on the latest budget and spending results for October and the entire 2009 fiscal year that ended at the end of September. In October, the Federal government spent $176.4 billion more than it collected in revenue (not including new debt). For the entire fiscal year, the Federal government spent $3.53 TRILLION on tax and other receipts of $2.11 TRILLION, requiring the government to finance through deficit spending another $1.42 TRILLION. The 2009 deficit of $1.42 TRILLION was $958 billion more than the previous record year of deficits (2008).

As I like to do, let's have some fun with math:

• In October, the Federal government spent almost $4 million a MINUTE that it did not have and had to finance. As an example, in the time it takes you to read this final post, your government would be another $4 million in the hole.
• On an annual basis, the Federal government spent about $2.7 million a MINUTE that it did not have.
• If you had spent a $1,000 a day, a figure that most of his could probably live comfortably on, since the day Christ was born, you would still not have spent a billion dollars. In 2009, the federal government covered that ground within three hours.
• To cover just the budget shortfall of $1.42 TRILLION, every one of the 130 million US households would have to kick in almost $11,000 just to cover the deficit, before paying regular taxes. Each household would theoretically pay another $27,000 to cover the remaining part of the Federal budget.
• In fiscal year 2009, the Federal government spent 67% more than it took in via taxes and other revenue sources. As an example, if you are a typical US household making about $57,000 a year, you would of had to spend about $95,000 to keep up with the government. As you all know, that kind of spending lifestyle will not get you far.

But thank goodness the President is stepping up to get the budget under control by boldly looking for a freeze in spending and maybe a 5% decrease. Will that solve the problem? More math:

• In the best case where he gets a 5% decrease across the board, he would get the budget of the Federal government from $3.53 TRILLION to a miserly $3.34 TRILLION. This would theoretically leave the country with a $1.24 TRILLION deficit that would still be a record deficit by far.
• If each US household had to cover the reduced deficit, each one would be on the hook for just under $10,000 just to cover the spending overrun, hardly a bargain.

There are three problems that arise with this analysis as I read the article. First, the 5% is for domestic agencies which implies that defense, Social Security, and Medicare and other categories of government spending would not be under the 5% edict. Second, the article says it could be as much as 5% which means it will not be a 5% across the board cut. Finally, the article correctly points out that reducing government spending in an election year such as 2010 is usually not done. Bottom line: this 5% target will probably never see the light of day and thus, will have no effect on Federal government spending.

Now, is the Obama adminstration really smart or is it a Mark Twain imbecile? Either way, we are screwed. If it is really smart, then it must be betting that we and the rest of the world are imbeciles since anyone who does the simple math we did above would realize that this edict is nothing more than a lame public relations stunt designed to fool the Chinese and other purchasers of US debt instruments that we are really working to reduce the deficit and fool voters into thinking that this administration is serious about deficit reduction. If it is an imbecile, than we are really, really screwed since it did not do or did not understand the simple math above that proves his 5% edict is useless.

This imbecile view is consistent with an order the Obama adminstration gave earlier in the year and which was debunked by this blog where he wanted to find $100 million in spending cuts. As you may recall, $100 million in spending cuts would be worth about $.77 per household. If Obama and his economic people really believe they are reducing deficit spending with these two lame orders, than the country will hit financial Armageddon very, very quickly since this type of spending does not even account for the coming tidal wave of baby boomers who will be swamping both Social Security and Medicare very quickly.

That is why several steps in "Love My Country, Loathe My Government" are so very important. Step One must be implemented immediately, i.e. begin reducing government's size by 10% a year for the next five years. Steps 9, 10, 11, and 12 are also critical in getting the future entitlement programs under control with the least amount of pain. Anything short of these bold steps will not rein in out of control Federal spending which will eventually crush the economy and financial well being of every American. Cheap 5% public relations stunts will solve nothing.

Final note: the Democrats have been in charge of Congress for the past three years. Under the Constitution, Congress is responsible for authorizing all government spending. Thus, while Bush has a lot to blamed for in creating this record deficit spending, it has been the Democrats who have controlled the purse strings for three years, and the Presidency for almost a year, under whose watch these dangerous deficits arose. Bottom line: everyone in the political class is to blame.

Visit our website at www.loathemygovernment.com to order an autographed copy of the book, "Love My Country, Loathe My Government -Fifty First Steps To Restoring Our Freedom and Destroying The American Political Class" and to sign up for the cause. The book is also available online at Amazon and Barnes And Noble.