Shots Across the Bow

A Reality Based Blog

 

Hard Truths

Last night at the GOP convention, New Jersey Governor Chris Christie said that the time had come for the American People to be told some hard truths.

Then he utterly failed to tell us any of them, which is typical of today's politicians.

He's right, though; we do need to face up to some hard truths, so let's look at one together, right now. We don't have to wait for the election, or for Romney or Obama to tell us because we already know that neither one would ever dream of telling us the real truth because it is too painful. So let's talk, just between us.

Here is a hard truth: There is no way we can restore fiscal sanity to our budget without severely cutting spending AND raising taxes on almost everybody.

Now you know why I said you will never hear this from a politician of either major party.

Let me show you why I say that, so you will know that I am not just making stuff up to scare you. All of the numbers I use will be linked to official government sources so you can verify them for yourself. And, I promise that there will be no complicated math beyond basic addition, subtraction, multiplication and division.

First, let's look at spending and revenue, to get an idea of what our actual deficit really is. I'm not going to look at the budget, because there are significant chunks of spending that are off budget, and besides, we haven't had one of those in over three years anyway. Instead, I'm going to look at the actual National Debt. The site I'm using is the US Treasury Direct website. I'm using September 30 as my annual date since that is the final day of the US government's fiscal year.Plugging in the search criteria gives me the fol,lowing numbers:







DateDebt
08/28/2012$15,978,918,589,912
09/30/2011$14,790,340,328,557
09/30/2010$13,561,623,030,892
09/30/2009$11,909,829,003,512
09/30/2008$10,024,724,896,912
09/30/2007$9,007,653,372,262
09/29/2006$8,506,973,899,215

Now, we need to modify one piece of data in our table. The first number in the list is only to date, meaning it is for a partial year. We have to extrapolate from this number to get an estimate of what the debt will be on September 30, 2012. What I'm going to do is determine how many days of the year have gone by (333) and divide the increase in the debt so far ($1.19 trillion) by the days gone by. This gives me the increase in debt per day. Then multiply by the total number of days this year (366, it is a leap year) to get the total increase in debt. Then I will add that the the existing debt on Sep. 30, 2011 to get my projection. My result is $16,096,705,624,820. So now our table looks like this:







DateDebt
08/28/2012$16,096,705,624,820
09/30/2011$14,790,340,328,557
09/30/2010$13,561,623,030,892
09/30/2009$11,909,829,003,512
09/30/2008$10,024,724,896,912
09/30/2007$9,007,653,372,262
09/29/2006$8,506,973,899,215

Next, I'll determine the actual annual deficit by subtracting the past debt from the current and working my way backwards. For example, I'll subtract the total debt on Sept 30, 2011 from the estimated total debt on Sept 30, 2012 to get the deficit for fiscal 2012. And so on.







YearDeficit
20121306365296263
20111228717297665
20101651794027380
20091885104106600
20081017071524650
2007500679473047

Taking an average of the last 5 years gives us an annualized deficit of about $1.4 trillion dollars. That's how much money the federal government spends than it takes in. Now I know that this number is significantly higher than what is reported by the White House or the press, and there's a good reason for that. We're not playing with Washington's phony number. We've bypassed all the "modifications" and "off budget expenditures" in order to look at the bottom line.

And it is pretty ugly.

The Obama plan to deal with this deficit is to raise taxes on the 1%, leave the middle class alone, and slow the rate of increase in government spending and hope to be out of office before the crash. The Ryan plan isn't much better. He wants to cut taxes on everybody, reduce the growth in government spending even more, and hope to be out of office before the crash.

There is not one major party candidate talking about the serious spending and tax reform needed to balance our budget, mainly because it would be political suicide to do so.

Let's look at Obama's plan for a moment to see what I'm talking about. In 2009, the last year the statistics are available, the top one percent of tax payers had a total adjusted gross income of $1.33 trillion. In other words, the government could have taken every penny of taxable income from the top 1% in 2009, and still run a deficit of $550 billion. There is simply no way that 'taxing the rich' will generate enough revenue to support continued spending at these levels, much less start to pay off the debt we've accumulated.

Check out the debt clock. Watching the numbers spin up should scare the crap out of you.

So, how do we get out of this mess? Well, look at the last row in the last table. Our deficit for 2007 was only $500 billion. (And it is a scary world when $500 billion can be preceded by the word only.) If we reduce spending back to the pre-emergency levels started in 2008, then we have a much more realistic chance of balancing our budget.

But it will still be a struggle. We would have to cut about $1 billion dollars from the Federal budget. It seems like it wouldn't be so difficult; we've only been spending at this rate for 5 years, but getting politicians to cut spending is not an easy task, particularly since they know that any real spending cuts will result in the end of their political careers. And even after cutting spending by $1 billion, we'd still have to raise our tax collections by roughly 57% to cover the ongoing deficit.

Now this doesn't necessarily mean tax increases. Economic growth will increase revenues faster and more painlessly than tax increases, but that doesn't come quickly or easily. Of necessity, there will be tax increases for everybody, not just the wealthy 1%.

So these are some hard truths. Our children will pay for the spending orgy we've been involve in. And I mean that literally, in many different ways. They will face an economic burden that has broken the backs of countries throughout history. They will face a lifetime of hard work, with no promise of security as they get older. They can expect little in return for their efforts except maybe, just maybe, a better life for their kids.

And that is the hardest truth of all.


Posted by Rich
Politics • (0) CommentsPermalink


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