November 24, 2009

America: Living on Borrowed Time

Let's break it down:

1. America already owes nearly as much as she produces:

2. Where is all this borrowed money going? Most of it goes to Entitlements (Social security, Medicare, Medicaid), which are increasing much faster than discretionary spending (National defense and other discretionary items). This means that every year, the amount of "wiggle room" in the budget shrinks:

3. Let's look at part of that "wiggle room": what it costs to keep America safe. As a percentage of what we produce, defense spending has been cut in half since 1960:

4. But our government's not the only thing living beyond its means: 25% of American homeowners owe more than their homes are worth:

So we have a real problem here. In just a few years, our debts will outpace our ability to create wealth.

Sometime in the next 20 years, entitlement spending alone - this doesn't account for trivial items like national defense - will exceed what we take in.

And every year the discretionary portion of the budget (the amount we're allowed to cut) grows smaller and smaller... while entitlements (expenses not subject to review) continue to expand. This means that every year it will become harder and harder to control the deficit.

The only part of the budget subject to review - the "wiggle room" - is discretionary spending. And the lion's share of our discretionary budget is the defense budget. We've already cut defense spending in half. Obama's budget would reduce that even further - down to 3% (while we have two wars ongoing):

Yet Obama plans to devote 3% of the budget to scientific research, so apparently it's not (in his mind at least) a question of whether we can afford the defense budget. It'ss a question of what is more important. National security? Or research?

Now let's look at the income side of the equation. By 2030, mandatory government spending, otherwise known as "entitlements" (and this is only part of the total budget: the part we can't cut) is projected to exceed revenue - and that's without the additional debts incurred by health care reform. This is from a 2007 report:

Now to the truly alarming part. Keep in mind that this assessment was prepared in 2007. Therefore, it takes neither Obamacare nor the stimulus bill into account:

While the near-term outlook for shrinking deficits is encouraging, the long-term picture presents a major challenge due to the expected growth in spending for major entitlement programs. In only two years, the leading edge of the baby boom generation will become eligible for early retirement under Social Security. In five years, these retirees will be eligible for Medicare. The budgetary effects of these milestones will be muted at first. But if we do not take action soon to reform both Social Security and Medicare, the coming demographic bulge will drive Federal spending to unprecedented levels and threaten the Nation’s future prosperity.

No plausible amount of cuts to discretionary programs or tax increases can help us avert this major fiscal challenge. As the accompanying chart shows, assuming mandatory spending continues on its current trajectory and the tax burden is held at historical levels, by 2040 Federal spending will accelerate to a level at which mandatory outlays and debt service would consume all Federal revenue. By 2070, if we do not reform entitlement programs to slow their growth, the rate of taxation on the overall economy would need to be more than doubled, placing a crushing burden on the economy that is required to produce the revenues to support the Government programs in the first place.

Let me repeat that for effect:
No plausible amount of cuts to discretionary programs or tax increases can help us avert this major fiscal challenge.

In other words, there isn't enough discretionary money or tax revenue out there to keep the government from going bankrupt...

Unless we cut entitlements, too. As if all that weren't bad enough, GDP was just adjusted... downward.

So what's Obama's solution to this problem? More entitlement spending that will put 20% of Americans on government welfare:

I may be just a uterus, but even I know that doesn't make any sense. Don't worry, though. Andrew's still bullish on Obama:

I think Obama's handling of the economic crisis has been about as good as it reasonably gets; I think his handling of Iran is equally adroit; I find his relentless emphasis on reality in Afghanistan a good sign; I suspect the only way to get health insurance reform is the way he has attempted; I think the stimulus was necessary and sufficient; and I think unemployment will be coming down when he runs for re-election.

I have word from a reliable source that if Obama runs again, purple unicorns will also fly out of my ass. Meanwhile, pay no attention to all those scary budget office numbers from OMB, GAO, and CBO. They're just agitprop, baby.

Obama's a strategist. And in the long term, we'll all be dead anyway. Probably from Sarah Palin's lying lies.

No comments:

Post a Comment