This morning I read with interest – and amazement – the above headline. Does our president live in the same world that I inhabit? He’s worried about America’s increasing indebtedness and is pushing for a massive expansion of health entitlements (aka wealth redistribution programs) and the cap-and-tax global warming initiatives (aka wealth redistribution programs) and a host of other other wealth-destroying regulatory programs. Yet, he’s worried about America’s growing debt?
Our political system is only now perhaps emerging from a foolish policy of lowering credit standards to encourage universal home ownership. We’re now about to lower credit standards for health and energy investments. In effect, the problems of subprime mortgages are now being universalized. But, as in the subprime case, we’re assured that these moves will actually lower the national debt! Does reality have any relevancy?
[youtube:http://www.youtube.com/watch?v=LJReAunlOw0 285 234]
Federal spending is going up. Tax receipts are going down. 2009′s federal budget deficit is now up to $1.27 trillion as a result. That’s about triple what even big-spending George W. Bush could manage. Total federal debt now stands at over $11.66 trillion.
Many other developed countries have built debt loads twice ours and more, and without apocalyptic consequences. So it appears such enormous shortfalls do not pose an existential threat to the economy. At least, not yet. But high long-run deficits do slow growth. To help end the recession, government should reduce the deficit by spending less. Three reasons why:
-Today’s deficit is tomorrow’s tax increase. Deficits are paid for by borrowing. What the government borrows, it has to pay back. Sometimes it puts off that taxation by borrowing money to pay back previously borrowed money. But some day, borrowed money ultimately has to paid back by taxpayers. Increasing deficits necessarily means increasing future taxes.
-Government borrowing crowds out private borrowing. The higher the deficit, the more crowding out. This point is underappreciated. There are only so many investor dollars to go around. The $1.27 trillion the government is borrowing to pay for this year’s spending is $1.27 trillion that now cannot go towards job-creating corporate bond issues or stock IPOs. Imagine the opportunity costs.
-More spending begets more regulation. Government money comes with strings attached, as GM now knows. And once a rule is in the books, it’s in there for good, usually. When government spends so fast that it has to borrow, the process accelerates.
The budget deficit is expected to rise even higher as 2009 runs its course. There are already 1,270,000,000,000 reasons for government to cut spending to levels it can afford. How many more do Congress and the president need?
The federal budget deficit has already risen by $880 billion to an unprecedented $1.3 trillion. Most of the increase is attributable to recent increases in federal spending, including Obama’s $800 billion stimulus package, which the Congressional Budget Office says will actually shrink the economy in “the long run,” and which ended welfare reform, destroyed thousands of jobs in the export sector, and substituted welfare for productive investments.
Ironically, Obama had campaigned on a promise, since broken, to make a “net spending cut” in federal spending.
The increase in the deficit is driven largely by reckless federal spending, even though federal tax revenue fell at the fastest rate since 1932 thanks to the recession.
The Obama Administration wants to pile on even more federal spending, including a health-care “reform” proposal predicted to cost at least $1,000,000,000,000 ($1 trillion). In reality, Obamacare will likely cost far more than predicted, the way past health-care expansions always have.
One of Obama’s own advisers says the Obama Administration’s health-care plan will harm people with insurance while raising their taxes. CNN says Obamacare will take away 5 freedoms. It will also destroy many affordable health-care plans while breaking Obama’s campaign promises.
ObamaCare also contains affirmative action and subsidies for left-wing community organizers, and preferences for illegal aliens, who are exempt from its taxes and penalties, but may be able to access its benefits due to lack of meaningful eligibility verification safeguards.
Mortgage lenders are getting even bigger taxpayer subsidies to write off mortgage loans for potentially delinquent borrowers, reports today’s Washington Examiner. “President Barack Obama last week created another subsidy for home lenders, boosting benefits to lenders under the ‘Hope for Homeowners’ program created last summer. Under the 2008 law, Washington guarantees loans if lenders gave favorable terms, including principal reduction. The amendment Obama signed last week heightens cash payments to lenders and loosens standards.”
It’s not just lenders who are getting federal payments for writing off loans, but also companies that service loans without owning them. The servicers now have a financial incentive to write off other institutions’ loans to potential deadbeats, at the expense of whoever actually owns the loan — which probably includes some of the companies your 401(k) mutual funds invested in. Essentially, it’s a bounty on your 401(k).
The Obama Administration has now devoted at least $250 billion to mortgage bailouts, including high-income borrowers whose mortgage payments are not excessive, but who face financial difficulties because of other debts they incurred through excessive consumption. This will increase a deficit that now exceeds $1.8 trillion. Obama’s budget would increase the national debt over the budgets left behind by the Bush Administration by a phenomenal 26.3% of the economy.
Powerful Wall Street firms like Goldman Sachs, a major liberal donor that received billions it didn’t need through the AIG bailout, now are being given protection against competition from hedge funds, which did not get bailouts or cause problems for taxpayers. “Wall Street’s largest banks are getting what they want in the U.S. treasury’s plan to regulate over-the-counter derivatives by making all market participants adhere to the same capital requirements,” even funds that are small and ill-equipped to handle the hassle of such regulation. “‘The banks appear to wish to maintain the intra-dealer market and raise barriers to new entrants to keep the OTC business as compartmentalized as possible and to protect their profitable market conditions,’ said Brad Hint, an analyst at Stanford C. Bernstein & Co. in New York.”
Welcome to Episode 30 of everyone’s favorite podcast LibertyWeek, with your hosts Richard Morrison and Cord Blomquist and very special guest Jeremy Lott. We start with the end of the U.S. economy as we have known it: the $790 billion economic stimulus plan and its chilling consequences. We take note of Citigroup CEO Vikram Pandit’s pledge to work for $1 a year and celebrate some good news with Alabama’s plan to legalize beer with a higher alcohol content than most wines. We then enlist our listeners to defend against the War on St. Valentine’s Day and move on to Scandal Watch: Judd Gregg edition.
The highlight of our program comes with our interview with writer, raconteur and bon vivant around town Jeremy Lott. He talks about his book, The Warm Bucket Brigade: The Story of the American Vice Presidency, about Presidents’ Day and the best lunch to pack when hunting with Sarah Palin. Jeremy also takes on the much-anticipated Cool v. Drool Vice Presidential Snap Judgment Lightning Round. Finally we take some legal counsel with this week’s edition of Olympic News.
Regardless of your political party or ideological leanings, the notion of the federal government spending $2 trillion, adding to the national debt of nearly $11 trillion already, should make you stop and consider the staggering size of our national tab.
If the irony of using debt-based spending to solve a problem caused by debt-based spending has escaped you, perhaps these fun facts will put things into perspective:
- If you spent $1 every second, you’d have to keep spending for 412,000 years to get to $13 trillion. That means you’d have to start shortly after the time human beings first starting using stone tools and fire to get to $13 trillion today.
- $13 trillion in one dollar bills weighs 28 million pounds. That’s as much as 87 blue whales or 462 Statues of Liberty.
- If you laid 13 trillion one-dollar bills end-to-end they’d reach from the earth to the sun and back…five times over. That’s 946 million miles of greenbacks.
The amount we’re looking at now—roughly $2 trillion between the Secretary Geithner’s new bank bailout plan and President Obama’s stimulus package—isn’t small potatoes either. So what is $2 trillion?
- $2 trillion is bigger than the entire Gross Domestic Product of our neighbor to the north, Canada. In fact, according to the IMF, only Japan, Germany, China, the United Kingdom, France, and Italy have bigger total economies than the combined bailout/stimulus plan—all other countries on Earth have economies smaller than $2 trillion per year.
Then there’s the interest on this staggering debt, which isn’t exactly small. Paying the interest on the current $10.7 trillion debt cost Americans $451.1 billion last year alone. How big is that?
- That’s $1478 dollars in interest for every man, woman, and child in the United States.
- That’s bigger than the annual budgets of New York ($121.1 billion), California ($111.1 billion) and Texas ($83.8 billion) combined.
If you’re scared, upset, or disgusted by this, you can do something. Visit BeyondBailouts.org and tell your Congressman and the President what you think of the bank bailout and stimulus.
You can also click on the “ShareThis” button at the top of this post to forward these fun facts to your friends or share them on your favorite social network.
Correction: I originally listed the state budget of Texas as $167 billion, but that figure was not annual. Texas budgets for two years at a time, so the figure has been cut in half.
Over in the UK, their own financial mess is reaching genuine crisis levels. With a trillion dollar national debt, a currency crisis and their own bank bailout (the model Paulson followed) having conclusively failed, Britain is on the edge of bankruptcy:
The country stands on the precipice. We are at risk of utter humiliation, of London becoming a Reykjavik on Thames and Britain going under. Thanks to the arrogance, hubristic strutting and serial incompetence of the Government and a group of bankers, the possibility of national bankruptcy is not unrealistic.
The political impact will be seismic; anger will rage. The haunted looks on the faces of those in supporting roles, such as the Chancellor, suggest they have worked out that a tragedy is unfolding here. Gordon Brown is engaged no longer in a standard battle for re-election; instead he is fighting to avoid going down in history disgraced completely.
The tastefully-named Iain Martin is obviously angry, but he has every right to be. Gordon Brown encouraged Britain to gamble much more of its national income on his watch than America did, all the time proclaiming he had put an end to “boom and bust.” Brown’s bust is now so large it wouldn’t look out of place in a Russ Meyer movie.
That is why Brown and his cronies will be watching today’s inauguration with an audacious hope in their hearts:
In this gloom, the Prime Minister has but one slender hope: that somehow, by force of personality, the new President Obama engineers a rapid American recovery restoring global confidence, energising the markets and making us all forget this bad dream.
If this is the case, it is plain that officials of Her Majesty’s Treasury have not read the So-Called Stimulus Bill.
UPDATE: More on Britain’s plight from the excellent Andrew Lilico.
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