US deficit and spending out of control. Why spending our childrens future really matters.

Grand words and dire predictions without substance or the courage to tell the truth are meaningless.  Let us put this in perspective, President Obama still sounds good, but… 

A five-year freeze on discretionary government spending is worth about $500 billion in savings over ten years.  That is less than 15% of federal spending.  The deficit is about $1.5 trillion or to put it another way, $1,500,000,000,000.00.  

The chances are if politicians do not dole out discretionary spending, you will not vote to re-elect them. Why do you think there is so much spending?

Here is the truth. The American standard of living must go down to save the United States from a financial disaster like many European countries.  No, it is not going to happen this year or maybe even in five years, but unless we change our ways it will happen.  Why will the standard of living decrease, because your discretionary spending will have to decrease and why will that happen, because you are going to pay a lot more in taxes, directly and indirectly.    

We are in a real bind.  We have massive entitlements growing out of control (Medicare, Medicaid, Social Security and now the Patient Protection Affordable Care Act). 

To continue to afford them we have two choices, cut the programs or raise taxes on everyone (not just the rich, because that will not do it).  It has been estimate that to balance the budget income taxes would have to be raised by a multiple of 2.4.  That is, if you pay 15% now you will pay 36%. Raising taxes will come in several ways, either cut tax deductions like mortgage interest, change the tax status of certain items like employer-provided health benefits or simply raise the tax rates.  In either case, you will have less to spend. 

Some “experts” feel the current situation is no big deal.  When the economy revs up again we will grow our way out of this mess because federal revenue will increase.  Think of it this way.  Say you have $8,000 on your credit card and you barely make the minimum payment because you are counting on future raises to allow you to make larger payments and eliminate the debt.  Really, and between now and when you get those raises your other bills will not increase, inflation won’t have an impact, you won’t find something else to spend the money on (think Congress looking for your vote)?

The current national debt (money we owe mostly to foreign governments) as of December 2010 is $14,025,215,218,708.52, that is trillion.  The interest on that debt to date for fiscal year 2011 is $148,238,982,913.81.  You could do a lot with $148 billion other than to pay interest to China and others.

In addition, can we count on projections for the future as bad as they are?  Can we accept that repealing PPACA (a bad idea for other reasons) will increase the deficit? According to the Social Security actuary, PPACA will not reduce health care costs. 

Consider these projections and the reality what we have done.

The Congressional Budget Office dramatically upped its projection of the fiscal 2011 federal deficit today, estimating that the difference between government expenditures and revenues would reach $1.480 trillion by the end of the current fiscal year in September. The last CBO projection, in August, was for a $1.066 trillion deficit in fiscal 2011. The deficit for fiscal 2010, which ended Oct. 1, was $1.294 trillion. The fiscal 2009 deficit remains, for now, the biggest in American history at $1.416 trillion. 

As the debate heats up and you hear that we need to help the poor, the children, the senior citizens and we need to “invest” in this and that, ask yourself where the money will come from. The Center for American Progress will e-mail us explaining whom the cuts will hurt.  Guess what, they will hurt.  That is the trouble with making promises you cannot keep, it hurts when you renege.  When public employees cry foul over benefit cuts, think about your property taxes and state income taxes.  When the AARP blasts changes to Social Security and Medicare and unions want more taken from the wealthy, ask whether seniors are taking disproportionately from limited national resources and if the “wealthy” (defined as earning over $200,000 a year) can pay it all.  As Margaret Thatcher used to say, “sooner or later you run out of other people’s money.”

There is no question that someone can make a good case for spending more and more and rationalize the validity of any new program.  There is no question we need to do many things in this Country that are important.  However, what really matters is living within our means (including some reasonable debt) and that matters most to your children and grandchildren because those generations will feel the impact of today’s irresponsibility.

Related Articles

• US Budget Groups Warn That Outlk Is Much Worse Than CBO Says (forexlive.com)
• “Federal Budget Deficit Climbing Dangerously Higher on Continued 2011 Government Spending” and related posts (moneymorning.com)
• US CBO’s Elmendorf Repeats Warnings About Grim US Fiscal Outlook (forexlive.com)
• CBO Director: Trillion-Dollar Deficits Risk ‘Fiscal Crisis’ in US – Fox News (news.google.com)