Wednesday, November 10, 2010

Militant Ginger Balances America's Budget - Part One

In celebration of Occasional Professor Tom unarguably kicking my butt yesterday (in the debate about Chris Christie's gubernatorial career) I thought I'd launch an ambitious new five part project that would give him another opportunity - in which I solve America's financial crisis.

Militant Ginger Balances America's Budget
Part One


The other day, I saw one of the few 'tea party' bumper stickers I actually agreed with:

We live within our means... So should our government!
Buy one here.

It's a great sentiment - and a timely one, considering President Obama is raising the federal deficit to previously unheard of figures. The annual deficit is about $1.5 trillion - and the United States has outstanding debts of more than $13 trillion (roughly equivalent to the country's entire annual Gross Domestic Product.)

But the problem is - nobody's going to do anything about it.

It's all very well watching the tea party wail and gnash their teeth at Obama's spending - but when surveyed, 58% of them disagreed with tax raises to close the budget gap, and 53% of them objected to cutting major federal spending to do the same.

It seems that they went to the same school of economics as the late Ronald Reagan - who proposed that it was possible to balance the budget at the same time as cutting taxes and increasing spending (when in fact, Reagan significantly increased expenditure and raised the national debt to $3 trillion dollars.)

The simple fact is, America spends considerably more than it brings it - and it's crushing us.

Think of it the nation as a typical American household. The US is the equivalent of a husband and wife having an combined annual income of $50,000 and a $50,000 mortgage (which doesn't sound too unwieldy) but, after adding together car payments, credit card bills and other spending, actually spend $65,000 a year.

Each year that goes by, the more and more debt they incur (and the larger amount of their income they need to divert towards paying interest on it.)

That's exactly what's happening in America - the federal government brings in $2.1 trillion dollars a year in revenue, but outlays $3.5 trillion dollars (according to current figures.) We spend $200 billion a year in interest payments on this debt alone (and half of it is leaving the country!)

The tea party demand that we do 'something' do curb spending - but what?

There are modest proposals, like cutting Obama's big spending projects, and then epic libertarian ones, like scrapping The Department of Education. The problem is, none of them would make a difference.

All that other spending - from welfare payments to wind farms - is gravy compared to the three big checks the Federal Government has to write each year: The Military, Social Security and Medicare.

Together, those three alone add up to $2.13 billion (and growing) which is $30 billion MORE than our government brings in through tax revenue.

That means you could cut all other government spending - every single penny (including boarding up the White House, shutting down the Post Office and closing all the Highways) and it would still not be enough to stop this country hemorrhaging money.

So when the tea party complain about Obama's spending projects driving this nation into debt, it's like a fat guy in MacDonalds claiming that it's his Diet Coke which has made him pile on the pounds. We need to get real about America's spending - and in Part 2, I'll outline the areas we need to concentrate on.

Read Part 2

5 comments:

One Salient Oversight said...

Even Reagan raised taxes.

I say this because raising taxes is the only way to ensure good revenue once the economy begins to recover.

I would increase income taxes and corporate taxes.

If spending cuts were the only way, then cut spending in Defense. Get out of Afghanistan and Iraq and let the rest of the world look after them.

If you cut spending in Medicare or Social Security the people will revolt.

Thanks to the GOP and Reagan and Bush 2 for such overwhelming amounts of government debt.

Tom said...

Have you seen this?

OSO: Taxing cigarettes makes people smoke less. Taxing gasoline makes people drive less. What does taxing people who make money do?

Susanne said...

I enjoy these kinds of posts. :)

One Salient Oversight said...

Tom,

Think of the government as a business who provides goods and services for its customers, who also just happen to be its shareholders.

Tax is the price you pay its goods and services.

Tom said...

OSO, the important difference is that if a company charges too much for goods and services, I can choose to buy from a competitor.


There's a big difference between a private sector transaction (where both sides have to agree to a deal) and a public sector tax (which is imposed from above).