The Ever Growing, The Ever More Dangerous Thelma and Louise Federal Budget Deficits

Another distressing Associated Press article on October 15, 2010 reviewed the latest and depressing news on out of control government spending. According to the article, the Congressional Budget Office (CBO) is estimating that the Federal government deficit for the 2010 budget year will total $1.29 TRILLION. This is on top of the Federal budget deficit of $1.4 TRILLION from 2009. 

Other highlights/lowlights from the article and the mathematical implications include the following:  

• The administration is predicting that the 2011 budget deficit will rise to $1.4 TRILLION. Thus, in the first three years that Obama has been President, the federal government has overspent its revenue stream by an astonishing $4.0 TRILLION.  
• If you look at the annual budget deficit numbers from the CBO website, you will see that the cumulative Federal government budget deficit from 1968 until 2008 was about $5 TRILLION. Thus, in just three years, the Obama administration will have deficit spent about 80% of what the government had deficit spent in the past forty years combined. Unless the economy improves dramatically, the Obama administration is likely to equal or exceed the Federal deficit spending in just four years that occurred over the past forty years.  
• With about 115 million U.S. households in the country today, this year's $1.29 budget deficit burden comes out to just over $11,000 per household. in other words, at some point in time, every U.S. household will, on average, have to pony up over $11,000 to get this year's national debt back to zero.  
• But the $11,000 is for just one year of Obama deficits. His administration will have run up about $4 TRILLION in debt in the first three years. This means that the first three years of Obama administration will cost the average American household about $35,000 to pay off in the future. This is $35,000 that each household will not have to spend on new cars, bigger houses, more services, and other economy expanding activities  
• But wait! There's More! The Obama administration is predicting that the budget deficit for the next decade will be another $8.47 TRILLION of debt. Combine this number with the $4 TRILLION total discussed above and the per household cost comes to about $108,000 per household.  
• The article goes on to discuss the expiring Bush tax cuts. Every politician wants to renew the tax cuts for those making less than $250,000 but the Democrats do not want to let the tax cuts expire for those making more than $250,000 a year. They claim that these increased taxes are needed to offset the deficit spending of the political class and that these increased taxes would bring in about $700 billion over ten years. Two things here. First, do we really think that the current crop of politicians has enough self discipline to devote all of this $700 billion to debt reduction? I doubt it, it would be misspent and wasted under the current political mentality of spending. Second, even if the taxes were increased for the so-called rich making more than $250,000 a year, it would only reduce the next ten year's worth of excess government spending by less than 9% ($700 billion divide b y $8.47 TRILLION). In fact, if you let all of the tax cuts expire, the increased revenue to the government over ten years would only be about $4 TRILLION, less than half of the excess Obama spending. Thus, to have any chance of matching the expected deficits, not only would the Bush tax cuts have to expire but the tax rates on all Americans would have to be raised by at least as much as the Bush tax cuts.  
• In the article, the Democrats make a inane justification for the record deficits. They claim on one hand that Obama had to spend a lot of money that the country did not have in order to stimulate the economy via corporate bailouts and that they should not be blamed for the high deficits. However, they then turn around in the same paragraph and brag that most of the bailout money has been repaid. You cannot have it both ways. You cannot say the extra spending was needed to stimulate the economy and that is why the deficits are large and then turnaround and say the bailouts were successful because most of the bailout money has been repaid. 
• Yes, it is true that the President has appointed a commission to find a way to tame the deficit. Unfortunately, the political class in charge has already said that Congress will not consider any of their recommendations unless at least 14 of the 18 members of the commission support a recommendation. Since Republicans are against tax increases to reduce the deficit and Democrats are generally against spending cuts to reduce the deficit, it is not hard to imagine that very few to none of the Commission's recommendations will see the light of day.   

As a final point, consider some numbers form the September 27, 2010 issue of Fortune magazine that appeared in Becky Quick's column. According to her sources:  

1. The Federal government is currently spending $3 for every $2 it rakes in. 
2. Our national debt as a percentage of our economy's size recently exceeded 60% for the first time since World War II. 
3. In ten years, we will be spending more on debt interest payments than all other government non-defense items combined if we stay on the current spending trajectory. 
4. From 1948 to 2008, the Federal government spent about 19.6% of the country's gross domestic product while taking in revenues equal to about $17.9% of the GDP. However, under the Obama administration, we are spending a full 25% of our GDP while only taking in about 15% in revenue. 
5. If you include the outrageous spending at all levels of government in this country, "America's debt problem is already worse than that of Spain, Britain, and Ireland." 
6. David Walker, who was U.S. comptroller during both the Clinton and Bush administrations, predicts that we have about three years to fix our national debt problem before we become the next Greece.

The numbers do not lie. We are about to join Thelma and Louise as we go over our own cliff. The scary problem we have is that unless things change, we are going to have to rely on the same politicians and political parties that got us into this mess to get us out of this mess. Not a pleasant thought. That is why November is so important. We need to get rid of the people that created this problem and replace them with people that can solve the problem.

However, there is some good news. Over the next few posts we will review some thoughts of some very smart people that can show the way out of this financial predicament. These include some of the analysts at the Cato Institute and people with Reason magazine. We will also review the steps within "Love My Country, Loathe My Government" that can also help in the solving this problem.  

 

Our new book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

 

 

Please visit these other sites for freedom:
 
http://www.cato.org/
http://www.robertringer.com/
http://www.reason.com/
http://www.realpolichick.blogspot.com/
http://www.flipcongress2010.com/