March, 2015, Part 2, By The Numbers: Out Of Control Spending By Washington and Its Economic Ignorance

On a semi-regular basis we revisit the theme ”by the numbers” just to check in on the state of the country and political class using actual realities and their underlying numbers, not the spin or lies from our politicians. You see, politicians usually have nothing to gain by looking at reality and the numbers since they are more than likely to have screwed up reality and our lives in the first place.

That is why they would rather lie and deceive than tell the truth. But that approach can be destroyed by looking at the hard numbers behind the mess they have created. I once worked for a boss whose favorite saying was: There is nothing more devastating to an opinion than the right number.” And that is what we try to do with this theme is devastate politicians’ opinions by looking at the right numbers.

So let’s take a look at the numbers that have recently cropped up and again prove that the political class in America continues to be one of the worst set of people to ever hold office, given the state of the country, the many ways they screw up our wealth and government functions, and their inability or non-desire to step up and tell the truth.

Today we finish up our discussion on “by the numbers” today using the latest analysis of government numbers and other numbers as done by the Heritage Foundation:

1) Anyone with a smidgen of math and number analysis abilities already realizes that government entitlement programs such as Social Security and Medicare are growing much faster than the economy. Simple number analysis show us that as the Baby Boomers retire and start using the promised benefits the political class promised them long ago relative to retirement income and retirement medical care, the cash crunch on the Federal government gets more and more unbearable and unpayable.

Using government data from the Congressional Budget Office and Office of Management and Budget, and assuming that the Federal government’s tax revenue stream will be equal to the long term average of 18%, by 2013, just 16 years from now, government entitlement programs and the interest that has to be paid on our $18 TRILLION national debt (which is growing every day), will be equal to the Federal government’s revenue stream.

This means that before the national defense is funded, before the EPA is funded, before the Departments of Energy, Transportation, Commerce, Education, and dozens of other government entities are funded, the Federal budget is already accounted for. And the situation gets worse after 2031 with government revenue failing to cover the entitlement and interest payments.

Sources: Congressional Budget Office and Office of Management and Budget.

The numbers do not lie: unless radical changes are made to the national debt and the promises embedded within the Federal government’s entitlement programs, there will be an unprecedented budget crisis very soon: the Federal government and the national economy cannot withstand business as usual in Washington.2) As we showed yesterday with Bill Gates wealth, there is no way to overcome the national debt hole that the Washington political class has dug for us. The Federal government spends too much, it does not tax too little. The above number analysis and the impending 2031 doom verifies that reality. But let’s get away from Bill Gates and talk about the debt burden on average Americans. Heritage did another analysis to show what the national debt burden is today and in the future for every American if each one took responsibility for a fair piece of that debt:

• Just for the public part of the country’s debt load, a child born today will have a debt burden at birth of about $41,000.
• By the time that child is 18 years old, their share of the national debt burden will more than double to $91,000.
• Just six years later, their share of the national debt burden will be up over 50% to $142,000.
• And these depressing numbers include only the so-called “public debt.” As non-public debt is converted to public debt, which has to happen at some point in the future, these numbers are much too low to capture the total and real devastating debt effects on future American generations.

Really depressing numbers for today’s youth. They get to pay off the wasteful and fraudulent spending of today’s politicians without any of the benefits from that debt. This is the number legacy we are leaving for our kids and grandkids unless we take immediate and drastic action to get Federal government spending under control.And make no mistake, the current set of Washington politicians are the most culpable. Our total national debt is up about 80%, eight TRILLION dollars just since Obama took office six short years ago. And that will be his numbers legacy to our kids, our grandkids and our history going forward, uncontrolled spending with no societal benefits in return.

PUBLIC DEBT PER CAPITA



Sources: Congressional Budget Office, Office of Management and Budget, and U.S. Census Bureau.

3) We have previously pointed out several examples where state politicians raised tax rates on the highest earning state residents, fully expecting to see those higher tax rates result in higher state government tax revenue.The most classic example was written up in the Wall Street Journal relative to the state of Maryland. That state raised the tax rates on the state’s highest earning residents but ended up getting LESS revenue from the same higher earning residents than prior to the tax rate.What happened with this line of reasoning? In all likelihood those state residents, faced with paying more in taxes, simply moved out of state to avoid the higher Maryland tax rates. Thus, rather than seeing the tax revenue stream increase when tax rates were raised, the state ended up with less overall revenue despite the higher rates. People are not stupid, they will make the decisions that give them the most freedom, economic and political.Which gets us to the final number analysis from the Heritage Foundation. Over the past 50 years, the top Federal government income tax rate has varied from 91% to 28%. However, despite the wide range, Federal income taxes received as a percentage of the nation’s GDP has remained relatively constant. For example, according to IRS data, in 1990, the top Federal income tax rate was 28% which resulted in Federal income tax revenue to be equal to about 79% of the country;s GDP. In 2014, the the top Federal tax rate had jumped up to 39%, about 40% higher than in 1990, but the percentage of GDP was about the same, a smidgen higher at only 8.0%. Thus, despite Obama’s obsession with soaking the rich with higher tax rates, the bottom line is that there were not substantially higher tax revenues generated, as the IRS data below shows.
TOP TAX RATES AND TOTAL RECEIPTS



Source: Internal Revenue Service.

In other words, the top tax rate is inelastic economically compared to tax revenue as a percentage of GDP. Thus, why raise tax rates and reduce the economic freedom of Americans when lower tax rates results in about the same revenue as higher tax rates? Because the political class would rather try and control our lives, despite what the data, numbers, and realities tell us.That will do it for this brief, two post update under our theme, “by the numbers.” What did we learn today from the numbers:

1. Unless Washington changes its spending ways, soon the country will not be able to afford anything but interest payments on the national debt and entitlements.
2. Unless Washington changes is spending ways, a child born today will be faced with a national debt burden of over $140,000 by the time they are 24 years old.
3. Higher tax rates rarely, if ever,at both the state and Federal level, result in higher tax revenues.

The numbers do not lie, the numbers devastate opinions and spin of the political class. And unlike today’s politicians, starting in the White House, the numbers do not lie.Our 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 the following sites for freedom:

Term Limits Now: http://www.howmuchworsecoulditget.com
http://www.reason.com
http://www.cato.org
http://www.bankruptingamerica.org
http://www.conventionofstates.com
http://www.youtube.com/watch?v=08j0sYUOb5w

Snoopy And The Fiscal Downfall Of America, Part 2: The Whole Federal Government Debt Bomb

This is our second post in a three part series that is supposed to scare the daylights out of you regarding our dire financial situation, relative to debt and out of control government spending. Last Friday we focused only on the impending collapse of just the Social Security system and how even if that was the sole financial problem facing this country, if we stay on the current trend line even this one problem will bankrupt the country and destroy our freedoms and liberty. 

Today, we will look at the whole Federal government financial picture, leaning heavily on the recent dismal analysis from the nonpartisan Congressional Budget Office. Before we get into today’s discussion of fiscal doom, let’s review the Snoopy analogy we used to start off yesterday’s post since it still applies to the overall government financial malaise:

Many years ago there was a Sunday Snoopy comic that sets up today’s post. Seems Snoopy was going out for job on a cold, dark winter morning. Before long his knees started complaining because they were taking all of the pressure form the jog steps. The feet chimed in to complain that the knees did not know what they were talking about since the feet got the initial shock of each step. Before long the lungs started to complain from sucking in the cold winter air.

This went on for a while, with each body part complaining that they did not want to be out on an early morning winter jog. Finally one of them asks, “Whose idea was this anyway, to go jogging on this early and on this very cold morning?” At that point, the heart spoke up and said: “It was my idea because jogging is good for me and if I go, you all go.”

There are many serious issues facing America today. Failing public schools, a lost war on drugs, a leaky border, inept and lazy politicians, the constant battle for gay rights, etc. these are all important and need to be worked. However, relative to the Snoopy story, these are just body parts that need attention on a cold, dark winter morning relative to the basic fact: the United states Federal government is on a dangerous and fast track to fiscal ruin and collapse. 

And if that fiscal and financial integrity collapses, much like the heart, every other issue becomes secondary in face of an economic collapse, a collapse that trashes all of our freedom and liberty. We are going to take a few days to look at how dangerous that track is and how close we are to having a fatal financial heart attack that will make the other body parts, i.e. national issues, wilt in comparison to the dire consequences.

Okay, so from Friday we know that 1) Social Security alone will bankrupt the country if nothing is done and 2) that story of financial doom is likely to be present in other major government spending programs. Today we will prove the second point using the research and analysis of the Congressional Budget Office (CBO).

The specific basis of this discussion is the recently released CBO’s annual Long-Term Budget Outlook. which had some sober news for the American people. The basic bottom line from the report is the following graph:



The gruesome details from the graph include the following:

• Federal debt held by the public almost doubled in the first five and a half years of the Obama administration, rendering his 2008 campaign promise of cutting the annual Federal deficits in half either economic ignorance or another Obama Care-like deception.
• While the debt percentage will level off for a few years, the advancing aging and retirement of the baby boomer generation will cause it to start skyrocketing with the next five to six years. 
• At no point in the current trend of Federal government spending is there EVER a budget surplus, a surplus that could be used to start reining in the runaway debt.
• Within 25 years, the public debt will be about five times as large as the annual Federal government tax revenue stream, making any delays in paying down this debt harder and harder to do as time goes by.
• And this is just current public debt. The debt that one part of the government owes to another part of the government will eventually turn into public debt also so this is an underestimation of how bad things are.

The CBO went from this graph and the underlying analysis to predict how things might turn out if nothing is done, as summarized by the Minority Report website:

1. Federal Debt Is Soaring: The debt has doubled since the onset of the financial crisis, and CBO concludes the growth in the debt is “unsustainable.”
2. Now Is the Time to Act: CBO says that prompt decisions to rein in future deficits would expand employment and economic growth.
3. The Economy Is Slowing Down: CBO has again lowered its projection of GDP growth, and the average number of hours worked by Americans is shrinking.
4. Spending Is Still the Problem: Major entitlements and interest on a growing stock of debt will cause real spending to soar by 27 percent over the next two decades.
5. Raising Taxes Will Cost Jobs: Taxes will exceed their historic average level this year, and they are on pace to rise even further. Yet these tax increases still never match the pace of spending, even while they discourage work, saving, and investment.
6. Entitlement Reform Is Key: We run the risk of breaking our promise to seniors and future generations if we don’t reform our entitlement programs soon. 
7. The Debt Threatens Our National Security: CBO warns that our growing national debt could compromise national security by constraining defense spending and limiting the country’s ability to prepare for future challenges.

As we discussed yesterday, many issues that concern many of us today wilt in comparison to how far into debt the American political class has gotten us. If we do not take care of our debt like Snoopy was trying to take care of his heart, the other body parts (e.g. failing public schools, gay rights, climate change, lost war on drugs, etc.) do not matter at all once the heart gives out.

Our total national debt is currently around $18 TRILLION. Unless something changes and the politicians in Washington find some courage, abilities, and creativity to change the trend we are on, almost another $10 TRILLION will be added to that debt load within the next ten years. This will theoretically put a person debt load onto every American of over $100,000 each. Or, the whole financial system collapses before we add another $10 TRILLION and Snoopy and the United States die of a heart attack of epic proportions.

If you care about other issues, then your first action item is to help find a way to convince the politicians and out of control spenders in Washington to grow a pair and start acting fiscally responsible. Otherwise, your favorite causes are just a moot point in our country’s now fiscally endangered history.

A good place to start your efforts to help fix the debt issue is to visit our website for term limits, 

www.howmuchworsecoulditget.com

Because really, how much worse could new people be in Congress and the White House do if the current ones are running up a debt load that will quite quickly exceed the annual GDP level? These are the same incompetents that got us into this fix, I doubt they are the same that can get us out. And so far, despite the dire warnings of the CBO and other rational Americans, I know of no one in Washington who has put forth any kind of plan to resolve the growing debt bomb in this country, do you?

Our 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 the following sites for freedom:

Term Limits Now: http://www.howmuchworsecoulditget.com
http://www.reason.com
http://www.cato.org
http://www.robertringer.com/
http://www.youtube.com/watch?v=08j0sYUOb5w