The first post in this series focused on the fact that the Social Security system is already in a negative cash flow situation and from a time value of money perspective, is facing a funding deficit well over $20 TRILLION. Thus, Social Security alone, if no changes are made to the program, is probably enough to bankrupt the country.
Yesterday, we expanded our view and looked at the entire debt situation of the entire Federal government. The Congressional Budget Office estimates that if spending trends continue as is, the national debt will soar by almost $10 TRILLION in the next ten years, bringing it up to around $28 TRILLION.
If we make it that far, than every American would owe almost $90,000 to pay off that debt. A family of four would owe about $350,000 to pay it off. The good news, if you want to call it that, is the country and the economy could collapse from the debt load long before that ten year timeframe is complete.
Dire times that require courageous actions and sacrifices in Washington. But courage and sacrifices have never been hallmarks of this political class. They are the ones that got us into this fiscal mess, it is highly unlikely they we will be ones to get us out.
How out of control is Federal government spending? Consider the following analogy of government spending to an American household’s budget. The national budget numbers listed below are the official White House estimates of what the Federal government’s bottom line income statement will look like next year:
- Total Federal government expense budget for 2015 = $3,900,989,000,000
- Total Federal government expected income for 2015 = $3,337,425,000,000
- Federal government debt accumulation expected for just fiscal 2015 = $563,564,000,000
- Total Federal government expected national debt by 2015 = $18,500000,000,000
Now, let’s take this mega level, mind numbing trillion dollar levels down to a household level to see how ridiculous this spending is relative to an American household. Let’s take the Federal government expected income in 2015 and divide it by about 67 million, coming up with a household income of $50,000. This is about the current median income level for an average American household.
Let’s take that same deflator and divide it into the total government expense stream for 2015, yielding $58,442. Thus, putting the government into a typical American household scenario, this household earned about $50,000 in a year but spent over $58,000. Another way to look at the numbers is that this household’s expenses were 16% above its earnings in this annual scenario.
You may be able to do that with borrowed money at the household level for a little while but very soon, that kind of debt spending will force you into bankruptcy and force you to lose everything you own.
And these calculations do not include the national debt that has already been accumulated. If we deflate the national debt by the same deflator, 67 million, than our theoretically household has already run up a previous debt load of over $276,000. Thus, this example house hold exceeded its means by 16%, or over $8,000, which would be added onto the existing debt load of $276,000 in 2015. This household is about to enter bankruptcy.
Which means at the macro, Federal government level, so is the country. You cannot keep running up 16% deficits, year in and year out, and expect that no bad things will happen. At some point the rubber band snaps and we are getting very close to the snapping point.
Oh, and by the way, if you are thinking of taxing the wealthy in this country to an even greater extent to fix this problem, forget about it. To show you how idiotic that notion is, let’s take it to the extreme and assume rather than tax the wealth’s income more, let’s magically confiscate all of their wealth and liquidate it into cash. Since Forbes has just released the estimated wealth of the wealthiest people in the country, the timing could not be better for this math exercise.
The math goes as follows:
- In 2015, the Federal government will spend about $10.7 Billion a DAY!
- If we take the Forbes estimate of the ten wealthiest people in America, and add up their total wealth, and divide it by the 2015 Federal government daily spending rate, we see that the total wealth of the richest ten people in this country could operate the Federal government for….45 days, less than two months.
- If we include the next ten wealthiest Americans, added up and confiscated their total wealth, the wealthiest twenty people in the country could fund the Federal government in 2015 for a grand total of … 70 days, about ten weeks or just into March.
- If we include the wealthiest fifty Americans, added up and confiscated their total wealth, the wealthiest fifty people in the country could fund the Federal government in 2015 for a grand total of…107 days, or just beyond the April 15 tax filing deadline.
- The total wealth of the wealthiest twenty Americans could pay off about 4% of the national debt, the wealthiest fifty could pay off only about 10% of the national debt.
And remember, we are talking wealth, not income. You could only do this theoretical confiscation once, next year there would be nothing left to confiscate. And given you stole these folks’ wealth, every year going forward the rest of us would have to make up the taxes the wealthy pay every year since it is highly doubtful they would try and get rich again just to have their hard earned wealth taken away.
Even if you just took 10% of their wealth, you could fund the Federal government for 10% of 107 days, or just under 11 days, a week and a half. You cannot get there from here.
We go through all this to prove a point: unless we get real serious real soon about fixing the ever growing and out of control spending of the Washington political class, even if we could magically take and apply all of the wealth of the wealthiest Americans against the problem, we would come nowhere close to erasing annual deficits, erasing the overall national debt, and finally getting the country on a solid fiscal footing.
Spending reductions and eliminating waste and unnecessary government programs is the only real solution. We have already shown how to take trillions of dollars out of the problem without negatively affecting most Americans. That detailed plan can be reviewed at:
However, that plan requires that Washington politicians take the courageous steps of saying no to lobbyists and voting blocs, finally rolling their sleeves up to clean up what is now a broken and dysfunctional Federal government bureaucracy, and focusing primarily on this problem, leaving other issues like the name of the Washington Redskins football team, how much soda we should drink, etc. for another time. Because really, if the country financially collapses, does anyone really care what the name of the Washington DC NFL team nickname is?
However, saying no, rolling up their sleeves, and focusing are three skills that constantly elude those in Washington. That is why term limits may be the only way to fix what the incumbents have broken. You can do so at:
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
No comments:
Post a Comment