Do you want to depend upon and be beholden to foreign countries for the financing of our on-going federal debt?
If you are undecided, here is one way to consider the question: if we accept huge deficit spending as part of America’s governance, and are dependent for that upon the whole world, on a daily basis, with 50% of the funding coming from China and Japan, do you think we are better or worse off?
In my view, we are worse off in many direct and indirect ways. But can we achieve a federal budget with a small amount or no amount of debt? Absolutely, and rather painlessly. And looking at our country’s finances is rather simple. Here it is.
Previous Post on Financing the US Debt
As background, a previous post outlined the ways the US debt can and cannot be financed. Here is the link.
http://indianaoracle.wordpress.com/2009/07/17/read-this-us-spending-and-debt-financing/
“Basically to fund the debt we have, much less what we are contemplating for future deficit spending, either:
- those who have previously purchased our debt have to increase their purchases to 3 times last year’s levels; or
- we have to fund spending which exceeds federal revenues by effectively printing money.
Further:
- Increasing citizen and business taxes will help only to a degree and will drag down the economy.
- ‘Savings’ around government entitlement programs is creative bookkeeping at its finest.
Despite what is being spun out of Washington, there is no tooth fairy for this situation.”
What is GDP?
A measure of all of the services and goods produced in a country over a specific period. GDP has been trending downward in America since 1984. It is currently $13.8 trillion.
Current Data from the Congressional Budget Office
Looking at our country’s finances is rather simple.
Start with GDP (our generation of wealth as a country) then determine the percent of Outlays (spending) minus Revenues (taxes) equals Deficit (what is not funded). Here are past numbers and future projections from the Congressional Budget Office.
2007 Deficit: 1.2% of GDP
Outlays: 20.0 % of GDP
Revenues: 18.8 % of GDP
2009 Deficit: 11.2% of GDP
Outlays: 26.1 % of GDP
Revenues: 14.9 % of GDP
2080 Projection Based On Current Plans: Deficit: 17.8 % of GDP
Outlays: 43.7 % of GDP
Revenues: 25.9 % of GDP
Percent change in deficit 2007-2009 (largely due to the economic slump): +833%
If we implement what that this administration has planned, the change in deficit between 2007 and 2080 will be: +1,383%. Also you may notice there is a very large projected 36% increase in tax revenues from 2007. By itself this is almost unprecedented.
Now consider that 2007’s high revenue percent was with all the 2001 tax cuts in place and with AMT’s impact on the middle class not being a factor. Neither are projected to remain so going forward.
Think we can tax our way out of this or is a strong economy the key?
If we were to target 2007’s Outlay (spending) levels, just a 5% cut in federal spending would balance the budget. Then add the requirement that any new spending be offset with spending cuts, not tax hikes. It will take us time to get there, but such a strategy would definately work.
Think of how competitive America would be and how investors would be lining up to finance our expansion.
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The post is based in part on an article by J.T. Young on 4 Sept 09, “A 5% Solution for America’s Deficit Woes”.
2 Comments
Since I plan to continue calling my state Senators on the myriad of bills I am not in favor of, I will be interested in how well they receive this information. It is unfortunate that Congress hasn’t already been considering this approach. Let’s see, what areas of federal spending could additionally be cut to bring us up to a total of say a 35% cut in federal spending? How about government pensions, health care for gov’t employees, vacation and sabatical pay for government employees, any and all improvements to government offices that make them any better than what the military is allowed, no private planes at taxpayer expense…the list goes on. Then how about recharging the economy by backing off on all the meddling in commerce and agriculture. Here’s a good one; not using taxpayer monies for ILLEGAL immigrants and not making ILLEGAL immigrants legal (amnesty). Think we’re up to 10% yet? Let’s sharpen our pencils and see what else we can come up with other than these easy ones. And while we’re at it, let’s ask those men and women who are or will be running against the current crop of politicians what way they would like to see federal spending cuts made. Let’s get this country back on track and boost this economy instead of destroying it. Let’s use our own oil–we have plenty of it. If someone wants to build an engine that runs on something else, that’s fine. The market will decide whether or not it’s a good idea. France seems to have mastered nuclear powerplants…I think we should use this as a source also. Let’s look a bit closer at what our children are being taught at school too. Let’s make sure they are involved and informed–not indoctrinated. And if we’re confused, maybe we just need to pick up the “owner’s manual” and read that for some diection. Great info IO!
Nicely put. Here is another: Medicare fraud.
Kim Brandt, who leads Medicare’s anti-fraud efforts, said some estimate the agency loses up to $80 billion to fraud (IO:annually), though she thinks that number sounds too high. (The truth is, no one is sure. All they know is that the more they look the more they find, Brandt said.)
This area is a known, but the fraud investigation at Medicar is underfunded.