Tuesday, March 12, 2013
I've Got Some Bad News...And Bad News
I've been anxiously waiting for this week to arrive. This is the week that the Democrats will present their first budget in four years, supposedly "pre-blessed" by President Obama.
To get an early jump I've been scouring investigative reports from the Wall Street Journal and Washington Post. I also looked over on the Congressional Budget Office (CBO) site in order to glean some insight on what's coming. After gathering all the intel on the Dems I then re-visited Paul Ryan's budget plan.
And folks, I've got some bad news....and bad news.
It seems the "bare bones" Democratic budget calls for spending $46 trillion dollars over the next decade. And, yes, that figure represents a huge increase in spending, not cuts. To illustrate, for the last few years Obama and company has spent $3.6 trillion dollars per year and that's $1.1 trillion dollars more than we are taking in with tax revenue. In the last four years we've added $6 trillion to the national debt (counting the nearly one trillion dollar stimulus bill passed in 2009, Cash For Clunkers and the HARM program to write off bad home loans).
Now the CBO has run the numbers out for the next ten years and, with the costs of Obamacare, Washington, under the new Democratic budget guidelines, will be spending $4.6 trillion dollars per year through the year 2023. Assuming we don't have another recession, we might be able to produce a 2% Gross Domestic Product (GDP) growth. With the 2% GDP growth we'll be spending $2.1 trillion dollars per year more than we take in. Sadly, that increases the national debt from the current $16.5 trillion to over $26 trillion in the red by 2023.
And sadly, the other bad news is the Ryan Budget...yeah, the one that liberal Democrats says will push old people off the cliff. Ryan's ten year budget calls for federal spending of $41 trillion dollars over the next ten years, just $5 trillion dollars less than the Democratic budget plan! The Republican plan does not cut a single dollar of federal expenditures; it merely cuts the rate of spending growth!
Now folks, I'm going to ask you to go up in the attic, open up that old box of college texts, and pull out Samuelson's "Economics 101". That basic economic text will tell you that, when the government soaks up the nation's supply of capital, business growth will be anemic to non-existent. As the government, which is always given the most preferential borrowing rates, crowds out loans for business, you can expect an economic recession. Worse, as we saw during the Carter years, you begin seeing 20% annual inflation and 18% home loans.
And yes, it can get far worse: China now holds over ten percent our national debt, over $1.1 trillion dollars in our federal bonds. (Last year China told us to get straight on the budget or they would quit buying American debt, then sold $500 billion of government bonds just to show us they were serious!)
Budget gurus at The Economist and Reuters say that, if China and Japan stop buying U.S. government bonds, America could expect to see Banana Republic type inflation and interest rates.
20th Century America last experienced 20 percent inflation rates during the Carter presidency. During those years the economy was stagnant, unemployment soared, home buying was nearly non-existent and life was pretty miserable as soaring prices put a lot of folks on a Ramen diet. Older folks living off of their savings saw their buying power reduced by 60% as their retirement dollars were eaten up by inflation and a lot of Alpo was eaten by senior citizens during those years.
Could the next ten years be worse than that? Well, consider this; during the Carter years our national debt was less than $1 trillion dollars. There was still room for the feds to maneuver and manage the debt. We are now scheduled to hit the $20 trillion dollar debt mark in 2016...and will have maxed out that big national "credit card" called Uncle Sam.
So folks, choose your bad news. As the Dems and Republicans currently fight over a 2% cut ON THE INCREASE OF SPENDING for this year, and less than 2% of one year's budget, both parties should be asking how they'll pay the bills when 63% of every tax dollar will be going just to pay the interest on our national debt come 2016!
Get ready folks. When our creditors stop buying our debt you can expect more pain than the cancellation of White House tours, furloughing some teacher's aides and fish inspections in South Carolina.
Pardon me. I've got to go. I feel a migraine coming on.