Wednesday, April 12, 2017

April, 2017, Part 6, Political Class Insanity: The $20 TRILLION Debt Bomb and False Congressional Priorities

It is the beginning of another month which means it is again time to review the latest political class insanity from Washington and around the world. Political class insanity takes many forms including the wasting of taxpayer wealth, criminal fraud within government programs, inane and stupid political quotes and actions, the inability to create and implement effective and efficient government programs, stupid and ill performing economic policies and strategies, and other forms of insanity that continue to evolve and surprise and shock us. 

Today and for all of the insanity posts this month, let’s start off with a welcome piece of honest political dialog. It comes from a State Department spokesperson. Mark Toner, who is about to start the daily State Department press briefing. In a joking matter, he makes the following quote: "Welcome to the State Department. I think we have some interns in the back. Welcome. Good to see you in this exercise in transparency and democracy." 

He then burst out laughing at his own quote, indicating he also knew what a joke the Obama administration has been, especially Mr. Toner’s State Department, when it comes to cover ups, lack of transparency, denial of Freedom of Information Act requests, the prosecution of whistleblowers, etc. But at least it was a little refreshing to finally hear some actual honesty out of Washington as we see from the actual clip of the news conference:

With that context of honesty, let’s see what other insanity has been going down:

1) As we continue to rush to a whopping and destructive $20 TRILLION in Federal government debt, I thought it would be interesting to see where all of that Federal spending is currently going to. Because until you know what the problem is, where the out of control spending by the Federal government is, you cannot resolve the problem of out of control spending. The Fix The Debt website recently compiled such an analysis, in which they showed where a typical $100 worth of Federal government spending goes:


A few pieces of insanity as you review the above chart:
  • Almost $50 out of every $100 spent by the Federal government, $49.87, is nothing more than a massive redistribution of wealth process where the Federal government collects hundreds of billions of dollars every year in the form of Social Security, Medicare, and other taxes from some citizens and immediately turns it around and gives it back to other citizens in the form of Medicare cost coverage and Social Security income, after taking a healthy chunk off the top for itself and the government bureaucrats that operate the process.
  • Thus, half of what the government spends goes to very few programs but these are the same programs that Washington politicians do not even want to hint that they need to be changed, which means that it will be nearly impossible to get out of control spending under control if you do not dare fix half of the budget being spent.
  • And as more and more Baby Boomers retire, this $49.87 per hundred dollars spent is likely to go much higher, leaving fewer and fewer dollars for the other budget lines listed above.
  • Defense spending is already almost $20 out of every $100 spent and Trump wants to increase this budget item, making the trend go in the wrong direction for getting this line item under control, leaving less and less money for other budget needs.
  • While interest payments on the debt is only about $6.25 for every $100 spent, that is only because the Federal Reserve has kept the interest rates at historically low rates. As the Fed now starts to raise interest rates, that $6.25 spent could easily double or triple if interest rates ever get closer to historical norms.
Thus, the top four budget items in the Federal budget have incredible pressure on them to grow due to Baby Boomers aging, the ever growing military/industrial complex in this country, and rising interest rates. Unless things change radically and quickly, pretty soon the only four budget items left will be the top four listed above, everything else will be crowded out. That is not to say that things cannot be fixed:
  1. Obama’s ill fated budget reduction commission found ways to cut defense spending by about 15% without harming national security but Obama and every other Washington politician showed a total lack of courage and ignored the commission’s findings.
  2. Our book, “Love Our Country, Loathe My Government,” provided multiple ways to get Social Security spending under control including making it a means based testing for Social Security benefits, e.g. people like Bill Gates, Donald Trump, Warren Buffet, etc, would not receive Social Security benefits, allowing other, far less wealthier people to receive their full benefits.
  3. Every month we discuss ways to get medical costs like Medicare under control via our continuing series of posts under the theme, “The Unfolding Disasters Of Obama Care.”
  4. It is no secret that government programs like Medicare, Social Security, and others are so inept and inefficient that they lose upwards of $200 billion a year to criminal activities, a tragedy that should be immediately addressed with stepped up law enforcement and prosecution.
  5. Other, less prevalent budget line items should also be cut to just essential government services, just because a government expense is small is no reason to continue it.
The impending disaster that the Fix The Debt analysis shows can be fixed with some courage and leadership out of Washington. Which means, based on the historical lack of courage and leadership in Washington, that we should all be very, very scared.

2) But the Fix The Debt folks are not the only people that are alarmed about the $20 TRILLION in debt. According to a recent Heritage Foundation article by Justin Bogie on March 31, 2017, the Congressional Budget Office (CBO) is also alarmed by the out of control Federal spending:
  • The CBO recently released its “2017 Long Term Budget Outlook” analysis which lays out Federal budget budget and economic projections for the next 30 years.
  • Their analysis concludes that “time to fix the nation’s skyrocketing debt levels is running out and Congress must take immediate action to avert a future fiscal disaster.”
  • Failure to act will not only be economically disastrous but will also endanger our safety and national security.
  • The CBO concluded that unless spending changes are made, the public part of the national debt will rise from 77% of GDP today to an unsustainable 150% of GDP by 2047.
  • Compare this 150% to the historical norm of around 40%, with the ratio being as low as 35% as late as 2007.
  • The annual Federal government deficits would rise from the historically high levels of 2.9% today to a whopping 9.8% in 30 years.
  • As we pointed out above, interest payments are now about 1.4% of GDP today but would go as high as 6.2%, almost four times as high, by 2047 unless spending changes are made.
  • And within ten years, interest payments would consume more of the Federal budget than defense spending will.
  • Things are so bad that higher taxes will not be able to resolve the impending debt disaster according to the CBO analysis. Taxes will reach 20% of GDP by 2047, severely reducing Americans’ economic freedom and still not denting the ever increasing debt level.
  • In other words, Americans are not taxed enough, and cannot be taxed enough to fix the debt problem, only drastic and quick reductions in government spending will fix the debt problem.
Unfortunately, the Congressional Budget Office recognizes these massive problems with out of control debt but Congressional members do not.

3) To put the previous two debt discussion in perspective and show you how doomed we are, consider what has gotten several members of Congress really excited over the past few days. Apparently, there was a nasty customer incident on a United Airlines flight earlier this week where a passenger refused to deplane because United Airlines personnel wanted to give his seat to a United Airlines employee for a flight. His refusal got him forcibly removed from the plane, a removal process that physically injured him pretty badly.

For good reason, United Airlines is getting hammered in the news, on social media, and economically for such a brutal and idiotic customer service experience. I am sure that the injured customer will sue the airlines, rightfully so, for physical and mental duress, in a customer service breakdown. 

But what is so stupid is that all of a sudden Congressional members have come alive with outrage and indignation about this solitary if unfortunate event. They are calling for Congressional hearings, they are asking all types of questions, after the fact, about Federal Department of Transportation policies, they are showing up on news broadcasts to portray their outrage, etc. 

But this is classic “rearranging the deck chairs on the Titanic” behavior. The country is about to go bankrupt with an ever growing debt load, and these same people are nowhere to be found. No emotion, outrage, etc. But a single, high visibility incident involving a single person gets their attention, are you kidding me?! Lord help us!

More insanity tomorrow and beyond.

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