Tag Archives: Debt

Playing Russian roulette with the country’s future.

We need more adults. Robert J. Samuelson brilliantly explains why:

The budget impasse raises comparable questions. Can we resolve it before some ill-defined crisis imposes its own terms? For years, there has been a “something for nothing” aspect to our politics. More people became dependent on government. From 1960 to 2010, the share of federal spending going for “payments to individuals” (Social Security, food stamps, Medicare and the like) climbed from 26 percent to 66 percent. Meanwhile, the tax burden barely budged. In 1960, federal taxes were 17.8 percent of national income (gross domestic product). In 2007, they were 18.5 percent of GDP.

This good fortune reflected falling military spending — from 52 percent of federal outlays in 1960 to 20 percent today — and solid economic growth that produced ample tax revenue. Generally modest budget deficits bridged any gap. But now this favorable arithmetic has collapsed under the weight of slower economic growth (even after a recovery from the recession), an aging population (increasing the number of recipients) and high health costs (already 26 percent of federal spending). Present and prospective deficits are gargantuan.

The trouble is that, while the economics of giveaway policies have changed, the politics haven’t. Liberals still want more spending, conservatives more tax cuts. (Although the tax burden has stayed steady, various “cuts” have offset projected increases and shifted the burden.) With a few exceptions, Democrats and Republicans haven’t embraced detailed takeaway policies to reconcile Americans’ appetite for government benefits with their distaste for taxes. President Obama has provided no leadership. Aside from Rep. Paul Ryan (Wis.), chairman of the House Budget Committee, few Republicans have.

What do we get from our elected leaders? “Scripted evasions.”

Liberals imply (wrongly) that taxing the rich will solve the long-term budget problem. It won’t. For example, the Forbes 400 richest Americans have a collective wealth of $1.5 trillion. If the government simply confiscated everything they own, and turned them into paupers, it would barely cover the one-time 2011 deficit of $1.3 trillion. Conservatives deplore “spending” in the abstract, ignoring the popularity of much spending, especially Social Security and Medicare.

So the political system is failing. It’s stuck in the past. It can’t make desirable choices about the future. It can’t resolve deep conflicts.

This article should be required reading for anyone running for public office.

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Filed under Economics

Sen. Demint on Spending

From National Review:

Despite bipartisan promises to cut spending after the 2010 elections, Washington politicians are still voting to make the government even bigger and more expensive than ever.

Don’t believe me?

Even though the federal government is nearly $15 trillion in debt, it’s spending at record-high levels. Federal spending has gone up 5 percent in the first nine months of this year alone.

Just last week, Democrats and Republicans in the Senate passed three new spending bills to increase 2012 funding above 2011 funding levels. The bills will increase spending for the Department of Agriculture by $6.4 billion; for the Departments of Transportation and Housing and Urban Development by more than $2 billion; and for the Commerce, Justice, and State departments by more than $694 million.

This isn’t austerity. It’s gluttony.

All the talk of cutting spending after the 2010 elections has been just that: talk. The supposedly game-changing events of the past eleven months haven’t changed much at all.

In the spring fight to avert a government shutdown, Republicans promised $100 billion in real cuts but then compromised for $38.5 billion in future savings. In reality, the Congressional Budget Office found the deal still resulted in an increase of more than $170 billion in federal spending from 2010 to 2011. The “largest spending cut in history” ended up being a spending increase.

Americans were then told the real spending cuts would come during the summer fight over the decision to raise the nation’s debt ceiling. Conservatives pushed the Cut, Cap, and Balance plan to balance the budget within ten years in exchange for increasing the legal borrowing limit. Instead of doing that, however, Democratic and Republican leadership made a compromise deal to allow President Obama to increase our national debt to nearly $17 trillion, conditioned only on the creation of a supercommittee that would produce debt-reduction recommendations by the end of the year.

But the committee isn’t really trying to cut spending. It seeks only to spend the country into bankruptcy a little slower. Rather than letting the country rack up $23.4 trillion of debt by 2021, the supercommittee hopes to keep it to $21.3 trillion. It’s the difference between speeding off a cliff at 91 miles per hour versus 100 miles per hour.

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Filed under Domestic Politics

Who Owns America?

Here’s a quick and fascinating breakdown by total amount held and percentage of total U.S. debt, according to Business Insider:

  • Hong Kong: $121.9 billion (0.9 percent)
  • Caribbean banking centers: $148.3 (1 percent)
  • Taiwan: $153.4 billion (1.1 percent)
  • Brazil: $211.4 billion (1.5 percent)
  • Oil exporting countries: $229.8 billion (1.6 percent)
  • Mutual funds: $300.5 billion (2 percent)
  • Commercial banks: $301.8 billion (2.1 percent)
  • State, local and federal retirement funds: $320.9 billion (2.2 percent)
  • Money market mutual funds: $337.7 billion (2.4 percent)
  • United Kingdom: $346.5 billion (2.4 percent)
  • Private pension funds: $504.7 billion (3.5 percent)
  • State and local governments: $506.1 billion (3.5 percent)
  • Japan: $912.4 billion (6.4 percent)
  • U.S. households: $959.4 billion (6.6 percent)
  • China: $1.16 trillion (8 percent)
  • The U.S. Treasury: $1.63 trillion (11.3 percent)
  • Social Security trust fund: $2.67 trillion (19 percent)

So America owes foreigners about $4.5 trillion in debt. But America owes America $9.8 trillion.

Source.

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