Wednesday, October 9, 2013
Why the Republicans Are Insisting on Annual Budget and National Debt Control
Yesterday, dear readers, we talked about the American national debt and raising its limit - "ceiling" - so that the US can continue to borrow the 40% of it annual budget that is not covered by taxes collected and other miscellaneous income. Despite what President Obama would have us believe, the annual budget deficit and the national debt are inextricably linked. The lowest post World War II national debt as a percentage of Gross National Product (GDP) was posted by President Nixon at 35%, with President Clinton close behind at 36%. But in the early 21st century, debt relative to GDP rose again due in part to the Bush tax cuts and increased military spending caused by two wars in the Middle East and a new entitlement Medicare D program. Under President Bush, the gross public debt increased from $5.7 trillion in January 2001 to $10.7 trillion by December 2008, but federal spending under President George W. Bush remained at around 40% of GDP during his two terms in office. In the aftermath of the global financial crisis and related significant revenue declines and spending increases for economic support and Entitlements, under President Barack Obama, public debt increased to 63% of GDP by 2010, mainly due to decreased tax revenue, and the stimulus and tax cuts enacted by President Barack Obama. By By February 2012, public debt had increased to $15.5 trillion. Today, in 2013, it stands at $16.7 trilion. Let's consider the budget breakdown estimate for 1214 compared to 2000 actual figures : Welfare - 12% vs 10%; Defense - 22% vs. 20%; Pensions - 24%. vs. 25%; Health Care - 26%. vs. 20%; Other, including national debt interest payments - 17% vs 16%. If we analye these figures, it is clear that "Entitlements," i.e., payments promised to citizens, such as Social Security, health care for elderly and poor, and welfare were 55% of the US budget on 2000, and they are 61% for 2014. When we consider that the total budget was $1.8 trillion in 2000, will be $3.8 trillion in 2014, and will be $4.5 trillion in 2018, we can see that Entititlments are estimated to increase in actual numbers from $0.9 trillion today to $2.5 trillion in 2018. Despite the public concern about rising Welfare costs, Welfare costs are projected, from 2013 to 2018, to remain stable in actual numbers at about $0.40 trillion. We may be skeptical about the stability of Welfare costs, but for now let's assume the estimates are accurate. ~~~~~ So, when we hear Republicans say that any budget approval and any debt ceiling increase must include Entitlements reform, we must understand that they are talking about Social Security and Health Care costs that will represent 56% of the federal budget, but in actual numbers will increase from $0.9 trillion to $2.5 trillion. That is an increased Entitlement outlay of $1.6 trillion -- the size of the entire 2000 federal budget. These payments will be largely responsoble for doubling the annual national debt interest payment, which will increase, from 2013 to 2018, from $0.23 trillion to $0.45 trillion. The Republicans are not playing politics. They are trying to bring exploding Entitlements costs under control so that future generations of Americans will benefit from them and be able to afford them. AND, Why is the GOP so focused on revising or eliminating Obamacare? Because the cost estimated to be $0.9 trillion in 2010 is now estimated to be somewhere between $2.5 trillion and $3.5 trillion. Factor that into the above Health Care estimates and you can begin to appreciate the problem the Republicans are trying to make the Democrats face and resolve.
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We have come to accept that our borrowing power is an extra source of income to be spent on entitlements we don't need, programs we can't afford, and programs that are nothing more the wasteful and implemented in order to get "votes."
ReplyDeleteThe USA does not have an income problem ... We have a devastating spending problem. We are like someone who gets a new credit card and runs out and buys useless stuff.
We need to get a grasp on reality with what we can afford, what we need, what we'd like to have, and what we don' need at all.
We need to tighten our belts, live within our own income, lower and simplify the tax structure, create a viable jobs programs to get people back to work so there is more tax dollars flowing into Washington and our debt can be paid off in 10 years with a strong austerity budget.
ReplyDeleteWe should insist, insist, and insist that we address the budgetary control and debt reduction. There is NO reason to stop the discussion that has been trying to get to first base in Washington DC these last few weeks, but Obama has been leading the roadblock to having any meaningful discussions about the problem.
ReplyDeleteIf the Republican House continues on its current path the USA will not default on its bills at all. Each and every month the US Treasury Department collect on the average $260 BILLION dollars in taxes for the individual taxpayer and corporations. Subtract from that the $25 BILLION dollars owed each month for national debt Interest payment, the grand total left is $235 BILLION to pay entitlements, military, government salaries, etc. That’s $2.720 TRILLION DOLLARS annually. Why in the world are we borrowing so much every year. The solution is to:
1. Cut frivolous spending
2. Reduce taxes – business will expand and pay actually more taxes
3. Create jobs – puts more people on the tax rolls therefore more taxes flow into the coffers of the Treasury Department
4. Make accelerated payments on the national debt to reduce the Interest owed.
5. Drastically simplify the tax code
6. Demand a balanced budget – NO negatives and NO excess. Our federal government should run on a BALANCED budget . If there are excess in the Treasury Department it means one thing – we are over taxing the citizens and business.
This will work; this has worked in the past. President Reagan did just this and turned over a very healthy government to President Clinton. We had 12 years of prosperity until 9/11/2001 came along and drove our expenditures through the roof.
This past week the Treasury Department had to address paying off a record $7.546 Trillion dollars in maturing Treasury notes. They did so with no problem
ReplyDeleteThe Treasury then turned right around and SOLD some $8.234 Trillion dollars’ worth of new treasury notes. Leaving our national debt (the difference between $7.546 Trillion & $8.234 Trillion) to grow by some $777.3 Billion dollars.
Did we need to sell more Treasury Notes, certainly. Did we need to sell more in dollars that what we just paid out on maturing notes thereby raising the nation debt still more. NO we did not need to do this, but we did. And where did the $777.3 Billion dollars go?
You see this paying off interest, increasing interest, getting deeper in debt is an illness in Washington DC. They must have bushels of money on hand to do their “governing job”. That’s all they really do in Washington is spend our money on their programs for back home so they can get more votes and be re-elected and not seek a job on the open market.
Washington is a self-feeding frenzy. We elect them , they then tell us how we will live, how little of our money we will get to keep, and for our generosity they create a national debt that if not addressed will be a debt out great-grandchildren will need to pay off – somehow. But by then the interest accrued will have killed this country long before.
The USA does not have an overall financial problem … we have a giant spending problem that is out of control. It’s time that “We The People” take control back and tell our employees what we want them to do.
Is the tail going to continue to wag the dog here ?
We certainly need control over both the budget (which is nonexistent from Obama) and our National Debt (which is killing our prosperity and ability to help where help is needed in the world).
ReplyDeleteThis can only be done quickly with reduced federal & state government spending, reducing the tax burden (will increase business activity, which increases the taxes business pays) and a solid jobs program 9theis gets more people paying reduced taxes which increases the tax dollars paid)
Our Federal Tax code may well be the single most burdensome obstacle in our way to renewed financial security. It is obsolete, and out of sync with what our problems are and solutions need to be.
A Flat Tax, a National Usage Tax , etc. Some thing that takes up 2 pages not the 50,000 page tax code we have today. LOOPHOLES it is one gigantic loophole wanting to be accessed.
Is this not because the "baby boomers", the greatest percentage of the US population, is retiring and putting a strain on Social Security, Medicare and other entitlements???
ReplyDelete