Resistance Begins at Ohm!

Thursday, January 21, 2010

Back on the debt, stupid.

Congress is faced with raising the debt ceiling again. This is the total amount that the federal government is in the hole, but it reflects what is happening right now. The proposed increase is $1.9trillion, which they are hoping will tide them over through the November elections. Because they don't want to talk about it, or course. (This time last year, Obama said the deficit would decline in 2010 to $1.17trillion, so this is off the mark by - eh 50%. I guess the optimism about the return on TARP just wasn't justified.)

First, what's going on:
Revenue is down. If people aren't working and companies aren't selling, their isn't as much tax revenue coming in. In 2009, revenue was down by $400billion from 2008. Obama optimistically estimates revenue down even more - another 11% from 2009, which was a pretty bad year to begin with.

Budgets are up. Maybe your budget isn't up, but that doesn't mean that federal agencies need to tighten their belts any. For example, Transportation goes from $17billion to $70billion (including stimulus money). Do what???? an increase of more than 400%???
Specifically, mandatory costs (entitlements and interest mostly) are up 15%. Discretionary costs are up 13%. I don't know about you, but if I am broke and I have a choice, I don't spend money I don't have.

And off-budget expenditures are up as TARP continues to suck the contents out of your grandchildren's retirement funds.  Yes, we spend money from our budget, and we spend more money we don't even budget for and never seem to account for until -- dang we need to raise the limit on the credit card again. After all, it's an emergency, right?

Next, why this is important:
The estimates are so far off, it is laughable. If your government has no clue what it makes, then it has no business guessing how much new programs and entitlements are going to cost. Like health care or cap and trade. It is beyond irresponsible to put out a number and then be 50% short. It is incompetent or deceitful, you decide. Either way, fire the bums.

What we can't pay for now, we are going to pay for later. We can't pretend we didn't spend it. We can't spend social security revenue when we collect it and then spend it again when the bill comes due. We don't even count the future costs of those entitlements. So, this debt is more than just piling on to the debts from previous years. When you count in the debt for future years, the numbers are just incomprehensible.

We are spending more and making less. And we are pretending that this is our economic salvation. It isn't. What this does is devalue the dollar. Venezuela just devalued theirs by 50% and look at the revenue stream they have from oil.

If we are borrowing more and more and more, guess what, we are going to have to pay increased rates of interest. Not only is the interest going to increase because the amount we owe increases, but it is going to increase because we are on an ARM, not a fixed rate mortgage. You know what ARMs did for homeowners last year. China will be coming to collect the bill or the assets. Full faith and credit of the US Government is being treated like a bottomless piggy bank. Eventually, faith retreats to zero and we go bankrupt. What looks like a ripple now is a tidal wave in 10-15 years. You just can't run a country on a two year budget cycle.

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