Cut Government Spending Now!

Author: Vale

Debt ClockHave you looked at federal government spending lately? Take a look at the White House OMB. The first thing you should notice from Table 1.1 is that federal spending since 2000 has more than doubled. During the prior ten years from 1990-2000 spending "only" increased 42%. For both periods, inflation was about 33%. What does this tell you? Government continues to grow and the behemoth keeps getting larger, even after adjusting for inflation. There have only been two year-over-year periods where the government spending shrunk in the last 50 years. One was in 1965 and the other was 2010.

Don't jump for joy yet as the spending decreased from their prior years 0.25% and 1.75% respectively. Actually, it is amazing that the growth in government spending is nearly monotonic. Government spending is akin to someone going into your wallet and spending your money because ultimately, the money comes from taxpayers and more money for the government is less money for them.

  • The Deficit and Debt

Spending is bad, but a deficit is even worse because you are borrowing to spend even more than you have. Everyone knows that consumption debt is a bad financial play (you can easily dig yourself into a hole that you cannot get out of), but the government fools people into thinking that it is free money. There have only been a few select periods where our country has been "debt free" and none of those periods have been in the last 100 years. The closest we've gotten to zero debt was in 1836. Interest paid on debt is money that the government must pull from private citizens to pay for. Sure, there is a circuitous loop if some of the debt is held by citizens where the money goes right back into the population, but 30% of it is currently owned by foreigners. This money is lost by the Americans populous. And the principle of kicking the can down the road is not only irresponsible financially, it is immoral because it is stealing from future generations. Current generations apparently do not have a problem with this and those not yet born don't get a vote.

  • Give Credit Where it is Due

Obama took office Jan 20, 2009, and usually one could argue that his budget went into effect in October 2009 and anything before that was his predecessor's responsibility (at least that is what his supporters repeatedly try to argue). I say usually because Obama doesn't get a pass this time since he signed a $787 billion dollar stimulus into law one month into his presidency. In 2008, during President Bush's final full budget year, the budget deficit was $458 billion, a record at the time, and that even included the $700 billion in TARP funds authorized by Bush in his final year (and most of this has since been re-paid with interest!). However, during every year of Obama's presidency, the deficit has been over a trillion dollars.

  • The National Debt

So where does this deficit "go?" As previously discussed, it goes into the national debt. During the 4 years of Obama presidency, we will have added 48% ($5.3 Trillion!) to the national debt bringing the grand total to $16.4 trillion. Our GDP is $15.4 Trillion which means our national debt is now 106% of our GDP. This is bad. Why? Above the threshold of 90%, median growth rates fall by 1%, and average growth falls considerably more. Our massive government debt was a concern for the rating agency that downgraded USA credit quality a year and a half ago when our national debt was 13% less. We can be so 'fortunate' that the rest of the world is also having serious problems because the downgrade did not affect our borrowing costs, which are currently some of the lowest borrowing rates on record. In the future, the markets might become concerned that we cannot pay off our debt and interest costs will rise steeply.

  • A Troubling Situation

Our national debt reaching 100% of our GDP happened a lot faster than most were expecting. Even our acting president claimed he would cut the deficit in half by the end of his first term. Not surprisingly, he was not able to fulfill this grandiose claim.

So how could we equate this to an individual? Wouldn't it be great if we could spend all our money that we made during our lives, and then when it came time to retire, just borrow everything we needed until we died? The government seems to think so, because that is exactly what they are doing. The difference is, they are spending our money. This has got to stop before there is nothing left but government debt with the taxpaying citizens holding the bag. We are going to go over the Fiscal Cliff in a few days and it is the best thing that could happen for our country's long term future if the politicians do nothing. Unfortunately, we know that they will be meddling. 


+7 # Vale 2013-01-14 14:03
Obama used to be against increasing the debt limit and deemed it irresponsible and unpatriotic, but now that he is president, he is for it. What did he have to say about the debt limit in 2006 when Bush was in office?

"The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.... Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit."

These words are even more important today given that under Obama's regime, the national debt has increased 50% with his policies. You can be assured that he would be repeating an even more potent message today if another Republican were in the White House.
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+2 # Caiden 2013-01-14 16:08
I sometimes get the sense that politicians have an 'us' versus 'them' mentality against one another. They don't really care about our future, wasteful government spending or the national debt that will one day come back to bite us big time. They talk the talk all they want, but only when they don't have to be the cause of action. The taking away of the punch bowl has to be on the other political party's watch. An their objective is to be against whatever the other political party's position is, but blame as many of the problems on them as they can. Obama and the Dems complain about political gridlock, but they did the exact same thing to Republicans when they were in power. Now they can't handle it when the tables have turned. Hmmmpt.
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# Steve 2013-10-02 09:30
Wasn't the big difference between 2008 and 2009 that Obama changed the accounting of the Iraq/Afghan wars such that they showed up on these charts?
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# Caiden 2013-10-02 21:32
Obama changed it how? Can you be a little more specific, as I am not sure what you mean?
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# Vale 2013-10-14 23:42
Obama was so concerned about the debt while he was on the election campaign. Check out this Obama video pledging to cut Bush's deficit in half. Instead he tripled it. Good job.
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