Tag Archives: Cutting US Debt

America’s Breaking Point?

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America Struggles Under Mounting Weight

America Struggles Under Mounting Weight

The recent flood of immigrants across America’s southern border is sparking heated discussions about what to do with the tens of thousands of children and other illegal immigrants swamping our border enforcement. Some say we should send them home, others say we should care for them, grant them amnesty, and welcome them as American citizens. The critical question that must be answered first is where is America’s breaking point?

Certainly the left would answer that the United States is the most powerful country on earth. Certainly we can care for a few tens of thousands or over time hundreds of thousands but starving helpless children. Taken as an isolated problem, the answer is of course yes, America could afford to care for them. The problem is, that this is not an isolated problem. Deciding to care for hundreds of thousands of new indigents is not America’s only burden. Collectively, they are becoming insurmountable.

This discussion requires an analogy to bring it into focus. Michael Phelps is the most decorated athlete in the history of Olympic sports. He currently has a total of 22 Olympic medals: 18 gold, 2 silver, and 2 bronze. His strength power and speed in the pool is legendary.

Let’s take Michael Phelps and say that he was in a lake surrounded by people struggling to stay afloat. Each one of them was carrying a small weight some the size of the BB, others a small rock, and still others weighing several pounds. In order to save their lives let us assume that Michael Phelps began to take on their burdens. From some he would take a BB, and the impact would be nearly unnoticeable at first. His ability to swim to the next struggling person and take on their weight unhampered. As Michael moved from drowning person to drowning person one can see a time when he would shift from being the rescuer to being in danger of drowning himself. At some point the weights that Michael Phelps would be forced to carry would drag under the greatest swimmer in the history of mankind.

This analogy is meant to show what many don’t understand. America does have limits. How many burdens can we take on before like Michael Phelps we would succumb to their combined weight and sink below the surface? America is $17.6 trillion in debt and climbing. The “War on Poverty” has cost the American tax payers $22 trillion so far. We’ve gone from adding BBs every year to adding large rocks as the weight of the interest on that debt mounts. Every month the percentage of people working in this country, acting as Michael Phelps, declines. Regulations, terrible burdens on businesses of all sizes, pour from nearly every federal agency. Obama care alone is responsible for tens of thousands of pages of regulations. America’s social safety net is at the point of collapse adding even more weight to a crop and economy struggling to stay afloat. The world is becoming ever more dangerous with a resurgent Russia, aggressive China, and spread of radical Islam. With all of these burdens, the cumulative affect of adding hundreds of thousands of more illegal immigrants to this country comes into focus. Where is America’s breaking point? All American’s should be frightened to face this question. America is the greatest force for freedom in the history of mankind, and yet now we must question how long she can stay afloat?

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Behind the Curtain – Total US National Debt

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Projected US National Debt Based Upon Current Rates Of Spending

Projected US National Debt Based Upon Current Rates Of Spending

This graph tells a very scary story, and complements my last blog, “Global Warming vs the National Debt”, which compares the hoax of Man Made Global Warming with the stark reality of America’s National Debt. The data was derived from the White House’s own data (OMB supporting tables) from the “2013 Long Range Budget Outlook“.

The first critical element of this chart, which shows constant year 2013 dollars, provides a look at TOTAL US Debt, not oneobscured by debt to GDP ratios. As bad as the gap between the two lines looks, it is most likely optimistic. OMB data assumes a constant 3% interest rate on America’s debt, basically forever. The more that America borrows, however, the greater the risk that our credit rating will get downgraded again, and force those rates up. Just a small increase would be devastating. America also faces the real risk that it becomes a bad credit risk. Nobody knows when that will happen, but every year that we stay on this clearly unsustainable path, increases the odds that America hits the borrowing cliff.

The chart’s second critical element is the decreasing number of years needed to add $10 Trillion blocks to the debt. Each $10 Trillion takes considerably less time to accumulate and is proof of how dire America’s fiscal situation is. Spread the word, pass this chart around, elect fiscal conservatives to Congress, and hound your representatives to balance the budget. Time is running out!

 

Global Warming vs The National Debt

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Weatherman Al Roker interviewed President Obama on Tuesday in response to the recently released National Climate Assessment Report. During the interview Obama said

“But the truth of the matter is that if we don’t do more, we’re going to have bigger problems, more risk of … extreme weather events that can result in people losing their lives or losing their properties or businesses. And we’ve got to have the public understand this is an issue that is going to impact our kids and our grandkids unless we do something about it.”

It’s a real tragedy that he is so fixated on global warming when he should make precisely the same warning about our national debt. Let’s look at the reality of the mounting debt, as opposed to the invented 100 year global warming crisis.

1. “If we don’t do more, we’re going to have bigger problems.”

Yes Mr. President, you got that right. In a few short years at your current rate of dangerous spending, debt interest payments alone will exceed a Trillion dollars each year. That’s far greater than the defense budget, and billions of that interest will go to China, so that they can build up their military as we dismantle ours.

2. “Events that can result in people losing their lives or losing their properties or businesses.”

Right again Mr. President. The massive debt will result in rapidly rising interest rates, and is unsustainable according to the Congressional Budget Office. Businesses will go under, and Americans will lose their jobs, properties and homes when they can’t pay their mortgages due runaway interest rates and rampant inflation bound to come. Long before the ocean swallows New York City, our debt will swallow America.

3. “And we’ve got to have the public understand this is an issue that is going to impact our kids and our grandkids unless we do something about it.”

Mr. President, no more accurate statement could be made than that we are foisting an impossible debt burden upon our kids and our grandkids. Their future America will be crippled by the excessive spending you, your administration and reckless Democrats and Republicans created. You will go down in history as the greatest debt creator in all of human history.

Given his statement on saving American’s future, however wrong global warming is, it’s clear that President Obama can think strategically, with an eye on the future. Why, why, why then can’t he use the same foresight to address our debt? Why aren’t there democrats screaming with a global warming-like fervor to stop the destruction of our economy? Why indeed?

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What Our Government Won’t Show Regarding The Debt

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The Congressional Budget Office released a report in September 2-13 (updated in Oct) called the 2013 Long Term Budget Outlook. http://www.cbo.gov/publication/44521

Both Republicans and Democrats heavily quoted the report. Republicans were quick to reference that the report concluded that America can’t sustain the debt path we are currently on. Democrats used a very slight near term improvement to the annual Debt to GDP ratio as great evidence that President Obama and the Democrats in Congress were improving the economy and the US debt picture. As often occurs, the Democrats are stretching the truth to the breaking point. The comparison of spending to GDP, used everywhere in the report, is camouflage for what’s really happening. See a couple of the report’s GDP comparisons by clicking here. Nowhere does the report show the debt in actual dollars. The two charts below expose the truth, extrapolating from the report’s supporting data tables, and proves that fundamentally the US is on a disastrous spending path.

Chart 1 below throws the Debt to GDP ratio away and provides raw constant year 2013 dollars for both Total US National Debt and GDP. Democrats trumpet the minuscule dip of the debt (Red Curve) below the GDP (Green Curve) in the 2018 time-frame as great news. Despite the fact that it was caused by the Republican House, it’s so insignificant that you can barely see it. Unless we control the reckless federal spending tidal wave, the red curve (US real debt) will grow exponentially vs our GDP. US debt will pass $30 Trillion by 2030. At some point in the not so distant future, we’ll cross the point of no return, a cataclysmic debt “event horizon”. The responsible answer involves cutting federal spending.

Government Debt Projections Exposed

Government Debt Projections Exposed

Chart 2 shows two potential futures from CBO’s report. A $2T reduction across ten years reduces the debt growth to the green curve. A further reduction to $4T across ten years dramatically (purple curve) cuts the debt’s growth more, but it does not yet cut the debt. Additional reductions (beyond $400B/yr), along with pro-growth economic policies are critical to balancing, and perhaps dare I say, paying it off.

Only Immediate and Deep Cuts Stabilize Budget Future

Only Immediate and Deep Cuts Stabilize Budget Future

For comparison purposes, the Debt to GDP ratio was added to Chart 2 (dotted blue line). Notice that the Democrat’s touted reduction in Debt to GDP clearly happens at the same time that the Debt itself explodes.

BOTTOM LINE: Significant cuts are essential and need to happen yesterday.

NOTE: Comparisons to GDP are useful to assess one time in history to another. However, our goliath government created a new paradigm that makes the debt to GDP ratio a poor future comparison and pundit “feel good” conclusions based upon them grossly misleading. Why?

Past spending spikes were more “single year” events as opposed to spending baked into the Federal baseline as they are today:

  1. Huge spikes in past Annual Debt to GDP were largely due to military wartime spending, easily reduced after wars ended to return to sustainable spending. See below chart.
  2. Today’s spending, which drives each year’s budget deficit, is increasingly caused by sources that can’t be easily eliminated (unlike the case with wartime spending).
    1. Interest on the national debt. The interest avalanche grows each year, as shown here, and must be paid or the US Government defaults on its obligations. Even Progressives admit that’s a bad thing.
    2. Social welfare programs are the third rail of politics. Democrats use them to buy votes, and bludgeon anybody who suggests responsibly reforming them.

Interest and social welfare programs, which now include Obama Care’s massive costs, will consume the budget, pushing all else aside. That “all else” includes what our Constitution mandates the Federal Government actually do.

From CBO's "The 2013 Long-Term Budget Outlook"

From CBO’s “The 2013 Long-Term Budget Outlook”