The summer’s debt ceiling debate brought a lot of focus to the growing deficit problem. The “deficit” being the difference between what the federal government spends each year compared to the revenue it brings in. Listening to the Democrats tell the story the amount of spending cuts proposed to reduce this deficit was going to be catastrophic. Grandmothers would return to eating dog food. High School graduates would be unable to go to school because of a lack of student loans, and the poor would riot in the streets ala Greece and Great Britain. The non-Tea Party Republicans were touting how large and impressive the 1.2 trillion the cuts were. The spending cuts were unprecedented, and will save the world.
Here’s a secret that neither side told you. There were no cuts. The amount of spending in the coming years is going to go up. Really. No cuts. In the world as I know it, if I go to my wife and say “Dear, we have to cut back on spending”. I am going to mean and she is going to think that we have to spend an amount less than we are currently spending now. Now, I know what you are thinking. “Duh, that’s the way it works genius. Less means less. Less does not mean more”
Ah, you naive fool. We are talking the Federal Government here, not reality. In the real world it is not necessary to spend two million of dollars to take pictures of what is on the lunch trays of school children (http://coburn.senate.gov/public/index.cfm/2011/5/in-texas-schools-a-picture-s-worth-1-000-calories). In the bizzaro-world of the Federal a 1.2 trillion dollar cut is really an increase in spending. Or more accurately spending more, but less than the federal government had planned to spend.
According the Congressional Budget Office (CBO) http://www.cbo.gov/ftpdocs/120xx/doc12039/SummaryforWeb.pdf the federal government is on pace to spend 3.708 trillion dollars in 2011. If this were you and I over the next 10 years that would mean we would spend 37 trillion in that time, and if you accounted for inflation, say 3%, we would spend 43.78 trillion. The CBO projects that, if that the current tax laws and spending programs expire or increase as they are expected (insert eye roll here) the federal government will spend 46.06 trillion. So subtract out the 1.2 trillion in “cuts” that happened and we are down to 44.86 trillion, 1.07 trillion above inflation.
You say “So what, what’s a trillion over 10 years?” Ignoring the minor point that a trillion is still a whole bunch of money, maybe more than my wife could spend in a year. We don’t have it to spend. The same CBO report is projecting that revenues (that is fedspeak for taxes) will only be 39.08 trillion. That’s 5.77 trillion that we don’t have. That works out to 13 cents short for every dollar we spend. It will have to come from somewhere; either borrowing it or printing it. (I will address why increasing taxes won’t work another time.)
If that were you or I, it means that if we are bringing home $1000 per week, we are adding $520 to our credit card balance every month, and only paying the interest. How long before China, I mean, the credit card company cuts us off? I'm painting the rosy picture. In 2011 we are borrowing/printing 40 cents of each dollar that is spent. It is only the "projections" of how much in taxes will be collected, and the "facts" from the Obama administration on how Obamacare will effect spending in 2014 going forward, that have the deficit falling.
I'm not holding my breath on that one.
More to follow.
Here’s a secret that neither side told you. There were no cuts. The amount of spending in the coming years is going to go up. Really. No cuts. In the world as I know it, if I go to my wife and say “Dear, we have to cut back on spending”. I am going to mean and she is going to think that we have to spend an amount less than we are currently spending now. Now, I know what you are thinking. “Duh, that’s the way it works genius. Less means less. Less does not mean more”
Ah, you naive fool. We are talking the Federal Government here, not reality. In the real world it is not necessary to spend two million of dollars to take pictures of what is on the lunch trays of school children (http://coburn.senate.gov/public/index.cfm/2011/5/in-texas-schools-a-picture-s-worth-1-000-calories). In the bizzaro-world of the Federal a 1.2 trillion dollar cut is really an increase in spending. Or more accurately spending more, but less than the federal government had planned to spend.
According the Congressional Budget Office (CBO) http://www.cbo.gov/ftpdocs/120xx/doc12039/SummaryforWeb.pdf the federal government is on pace to spend 3.708 trillion dollars in 2011. If this were you and I over the next 10 years that would mean we would spend 37 trillion in that time, and if you accounted for inflation, say 3%, we would spend 43.78 trillion. The CBO projects that, if that the current tax laws and spending programs expire or increase as they are expected (insert eye roll here) the federal government will spend 46.06 trillion. So subtract out the 1.2 trillion in “cuts” that happened and we are down to 44.86 trillion, 1.07 trillion above inflation.
You say “So what, what’s a trillion over 10 years?” Ignoring the minor point that a trillion is still a whole bunch of money, maybe more than my wife could spend in a year. We don’t have it to spend. The same CBO report is projecting that revenues (that is fedspeak for taxes) will only be 39.08 trillion. That’s 5.77 trillion that we don’t have. That works out to 13 cents short for every dollar we spend. It will have to come from somewhere; either borrowing it or printing it. (I will address why increasing taxes won’t work another time.)
If that were you or I, it means that if we are bringing home $1000 per week, we are adding $520 to our credit card balance every month, and only paying the interest. How long before China, I mean, the credit card company cuts us off? I'm painting the rosy picture. In 2011 we are borrowing/printing 40 cents of each dollar that is spent. It is only the "projections" of how much in taxes will be collected, and the "facts" from the Obama administration on how Obamacare will effect spending in 2014 going forward, that have the deficit falling.
I'm not holding my breath on that one.
More to follow.
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