The real state of the union, pt3

“The problem with socialism is that eventually you run out of other people’s money.”  Attributed to Margaret Thatcher in various forms.

“A billion here, a billion there – sooner or later it adds up to real money.”  ~ Senator Everett Dirksen

“All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.  The vast majority of mortgages, including even subprime mortgages, continue to perform well.  Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.” ~ Ben Bernanke, May 17, 2007

Stick a fork in us, we’re done.

Mathematics are fundamental.  Math cannot be talked round to your way of thinking or persuaded to join your cause.  It does not care if you have a worthy argument.  Math just is.  If you tell us that 2+2 has to equal 127 or sweet grandmas lose the family home and puppies die of cancer, the math won’t change because you think it ought to.  Math just is.

I see a lot of folks’ eyes glaze over when numbers and economic lingo get batted about, because they don’t understand deflation and price inflation and they’ve never heard of debt auctions, so I’m going to just give you a few facts.  Simple.  Straightforward.  Unassailable.  (Though this is the internet and I’m sure some will want to debate the matter.)

The federal budget is 3.7 trillion.  Federal tax receipts total 2 trillion.  So, take your tax bill and double it.  How does that work for you?  Because that’s how much money your federal government is spending.  I’m actually being quite kind, because in reality merely doubling your tax bill won’t solve the problem as it only pays this year’s expenses, not the things Congress has promised to pay but has not added to the budget yet.  And it doesn’t touch the deficit.

We’re told that cuts to spending which will bring receipts in line with output would take us back to an age of barbaric severity, with the poor rioting in the streets, children starving, the elderly eating cat food and each other, etc ad nauseam.  You know, as was so common in fiscal year 2000.  Surprise!  That’s right.  Cutting the federal budget down to about half, or what we’re actually taking in tax receipts, could be accomplished merely by taking us back to the 2000 budget.

A depression is defined as 10% or greater contraction of GDP.  We hit that mark in 2009 (and every year since, only harder).  Government spending is included when calculating GDP, so the government merely increased spending by that much.  Et voila, there is no depression!

A recent poll showed that 84% of Americans believed we can balance the budget without touching Social Security or Medicare.  Spending on Social Security, Medicare/Medicaid and DoD takes every penny of current tax receipts, with nothing left afterward.  Nothing.  Let me repeat that: After collecting all tax dollars and spending them on those three things alone, there is not one thin dime left to pay for education, bailouts, TSA, transportation, IRS, farm subsidies, federal pensions…  Nothing.  The American taxpayer can only afford to fund Social Security, Medicare and the military, and only at current levels.

You could confiscate all the assets of wealthy Americans, right down to taking their shoes off their feet and selling them on eBay, and it would give us about 3% of the money we need.  (And we’d have no more rich people, so I’m not sure who we’d be shouting to tax then.)

Here’s the quick-and-dirty.  We can’t afford this budget.  It is quickly becoming mathematically impossible to ever repay the deficit.  The American consumer is broke, and since taxpayers are the income of the government then the American government is just as broke only they’ve been putting everything on credit cards ever since the taxpayers went broke.  And, exactly like taxpayers, they cannot do this forever before creditors start to suggest maybe it’s time they take back the plastic.

Published in: on May 24, 2011 at 8:59 pm  Leave a Comment  

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