The Ever Growing National Debt and Its Ramifications

For those of you that know me, you know that the problem of our soaring national debt is probably my biggest hot button issue. As you saw from my post last month, I consider this to be the single greatest threat facing our country today outside of a terrorist getting a WMD onto our shores.  The hole we have dug ourselves into is so deep that it will take a long time and tremendous sacrifices to crawl out of it. Immediate action is necessary because each day we wait, the problem compounds itself. We have already reached the point where the cost to fix this situation stands a strong chance of slowing down our already struggling recovery. However, due to the severity of the problem, the cost of inaction is far greater than the cost of action, because when the house of cards start to tumble it will fall fast and, just like Rome, our great empire could literally fall in a day (and if that unfortunate day comes hopefully you will own a fair amount of gold and a firearm).  It will make our “Great Reccession” look like a walk in the park.

What I would like to do is break down the national debt for you in easy-to-understand, layman’s terms. People sometimes think this topic is too complex to get their hands around but that’s not really the case despite the size of the numbers. You do not need to be a CPA to understand this. It boils down to a simple understanding of where our country’s income comes from, where the money goes, what expenses are around the corner and just a basic understanding of arithmetic. Most people have a rudimentary grasp of this from just watching the news but since so many news outlets have a political slant these days the numbers tend to get manipulated in the form of propaganda to bolster the ideology of one political party or the other. I’m just going to give it to you straight without the spin (well, maybe just a little).

First off let me tell you how I learned a majority about this topic myself. I’m a big fan of documentaries and one day I saw one called I.O.U.S.A. that blew me away. I already had a better understanding than most about this topic but my eyes got opened to some other parts of the problem that I hadn’t previously been aware of. The gentleman that created and narrated the documentary was David M. Walker. He is the former Comptroller General of the US and served as the head of the Government Accountability Office (GAO) from 1998–2008.  He was basically the nation’s top auditor and about as credible of a source as they come. He is currently the president and CEO of the Peter G. Peterson foundation. This is a non-partisan organization that has been lauded by some of the biggest liberal and conservative think tanks in the country. Its sole purpose is to raise awareness of our debt burdens and how they will affect current and future generations. In 2005 they started a Fiscal Wake-Up Tour and travelled the country educating people about our current financial crisis. If you haven’t seen I.O.U.S.A. then I highly recommend it. If you want to see the 30-minute Cliffs Notes version online you can go to www.youtube.com/watch?v=O_TjBNjc9Bo. The information is a few years old now but I promise that it will open your eyes the same way it did mine. I also waited to write this blog until I finished reading his book called Comeback America, which provided even more in-depth information together with some great suggestions of what we can do to get out of this mess. If you pick up a copy of it you won’t be disappointed.

Let’s start off with explaining what the difference is between the deficit and the national debt. This sometimes confuses people. The deficit is usually a yearly number that simply takes the amount of money that comes in to the treasury from taxes and subtracts how much goes out for our national expenditures. If more comes in than goes out we have what is known as a surplus (sadly, we haven’t seen too many years of this). Conversely, if more goes out than what comes in, that’s a deficit. This year the deficit is predicted to be anywhere from $1.5 to $1.65 trillion, the largest year on record (in dollars, not percentage of GDP).

The national debt is not a yearly figure, but a cumulative one. It is basically the total amount of money that we currently owe as a nation. Right now our national debt stands at $14.22 trillion, which is a staggering number. The amount has been in the news more than usual lately because of a political wrestling match taking place on the Hill to raise our current debt ceiling, which is currently set at $14.29 Trillion. According to the current Secretary of the Treasury, Timothy Geithner, under the existing limit we have only until August 1 before we start defaulting on our debt. The ramifications of defaulting are nothing short of disastrous.  Depending on how soon after that date an agreement is reached, we could be talking about a devaluation of our credit grade, a large increase in interest rates, a couple-thousand-point or more drop of the Dow, a return to recession and, at worst, a massive selloff and total devaluation of our dollar, which would likely lead to a world-wide depression and the cataclysm I described in my opening paragraph. Credit markets are all about trust. Because people always count on our ability to repay our debts is why we can keep the interest rates really low, which in turn limits our exposure to interest on the debt as well as keeps all other rates in the country low. Once that trust gets rattled is when the dominos start to fall. I am hopeful that something gets worked out before August 1 or we are in for a world of trouble. Call or write your congressman.  It’s that serious.

To give you an idea how large our existing debt is, if we wanted to pay it off we would need to collect $46,000 from every person in the country. Because not everyone pays taxes, the amount we would need to collect from every taxpayer is $128,500. That would be above and beyond a person’s normal taxes just to keep the government in operation. Obviously it’s not in the cards for this to all be paid at once.

Many people are curious where the money comes from for us to be able to spend more money than what we bring in. How can we owe over $14 trillion? Are we just writing IOUs? Well, not exactly. Our national expenses, above and beyond what we bring in from tax revenues, are paid by borrowing the money in the form of US savings bonds, treasury notes or treasury bills (T-bills for short). These are bonds where someone is basically loaning their money to our government in exchange for a return of their original investment at some point in time down the road (anywhere from one month to 30 years), and interest is paid every year along the way.

US T-Bills have long been considered one of the safest investments in the world (that is, unless we start defaulting). We have a sterling AAA credit rating from all the major rating agencies and that allows us to keep interest rates really low because the risk is low. In turn, this also keeps our other rates low, like for a mortgage or car note, which stimulates our economy. If you think it’s hard to sell your home now, imagine how much harder it would be if the rate on a 30-year fixed mortgage was 10% (or 18% like it was in the early ’80s). Despite these low rates we currently pay approximately $240 billion in interest on the debt. That’s about 20% of our national expenditures and more money than we spend on education, homeland defense, the Department of Transportation and NASA combined. Imagine what we could do if we had an extra $200 billion each year to spend and the good it could do. If left unchecked, in the next 10–12 years that interest payment would up from 20% of our expenses to around 50%.  It will become our largest national expense eclipsing the costs of Medicare, Social Security and Defense combined. Talk about living hand-to-mouth. That’s when we will really be in trouble and it’s not like 10–12 years is so far away either.

Who holds that debt, you might ask? Who are these people loaning us all this money? It comes from quite a few different sources. Some of them are:

  • Individuals like you and me
  • Corporations
  • Pension funds
  • Banks
  • Insurance companies
  • State and local governments
  • The federal government (mostly from the Social Security Trust Fund)
  • Foreign investors, banks, corporations and governments

The largest expanding area in the last 20 years is from foreign entities. China is the one that gets the most press because they have the largest share, but other countries like Japan, Russia, Venezuela, Saudi Arabia, Nigeria, Iran and many others have invested quite a bit in us as well. This wasn’t always the case. After WWII all of our debt was held domestically. About 50 years ago that started to change but it escalated quite a bit in the last 20 years. In September 2009 we passed the point where foreign nations and investors owned over 50% of our debt. By the end of 2010 the number grew to 63%. The problem with this is that it makes us reliant on these other countries and they use that strategically to their advantage. As long as they continue to invest, and invest heavily, our interest rates will remain low and that helps foster our recovery and growth. They know this. So, if there is something they want from us, all they have to do is threaten to stop
buying our bonds and our currency, or worse yet, they could start selling them.  This would drive rates way up, which would be put us on the fast track to a double dip recession or worse. So these countries use that leverage to get things from us that they want.

A case in point is Fannie Mae and Freddie Mac. Fannie and Freddie are government-sponsored organizations; however, they are still privately held corporations. Our government has a certain amount of influence over them, considering how many political figures sit on their boards, but we are not required to guarantee their debts (until, of course, they went into receivership and had to be taken over). Many foreign investors didn’t fully understand the relationship and assumed that any money invested in bonds or mortgage-backed securities from them were backed by the US Government. Since their rates of return were higher than T-bills these foreign entities invested heavily in these two organizations during the boom years, and when the housing crisis began they stood to lose a tremendous amount of money. So what did they do? Two of our biggest lenders, China and Japan, put tremendous pressure on us to bail out Fannie and Freddie so they would stay solvent. And guess what? We folded like a cheap tent. So far we have bailed them out to the tune of $135 billion and estimates say that we have another $19 billion coming in the short term and, if the market starts shrinking again, that number can rise to an additional $124 billion. That’s not chump change. Since we didn’t have the money in the budget to do this, or any of the other bailouts for that matter, we had to sell more bonds and T-bills to pay for it and the vicious cycle continued. In just the last three years our debt has grown by 43%.

If everything I’ve told you up to this point hasn’t scared you, then this next bombshell I’m about to drop most likely will. Here it is:  The $14+ trillion that I said was our national debt isn’t really an accurate number. It’s really only the tip of the iceberg. You see, our country has a unique accounting system that it uses that virtually no other country in the world employs. In other nations they put a liability on the books when money is supposed to be allocated for a future expense, based on a pre-set savings plan for that future cost. So, for example, if they need $20 billion in 10 years, and say they’re going to save $2 billion each year to hit that mark, they will show that $2 billion in each year’s budget and, if the money isn’t actually saved because of some emergency, that $2 billion immediately gets added to their deficit and national debt.

Conversely, the US only feels the need to list a liability on the books when the expense is actually incurred. So, in that same example, if we neglected to save the $2 billion a year, that wouldn’t show in that year’s annual deficit or our cumulative national debt totals. It would only show up in 10 years when the full $20 billion bill became due. If corporations tried to use the same accounting system they would be prosecuted and heavily fined by the FTC because it would seem like they were trying to hide expenses from their shareholders and creditors. However, the US somehow gets away with it.

So what is the real debt we currently owe? This is going to blow you away. We currently actually owe right now over $62 trillion! A number so large that if we stacked $100 bills on top of one another, the stack would actually reach from the Earth to the moon. To what do we owe that money? Here’s the list:

  • The National Debt – $14.22 trillion
  • Social Security – $7.7 trillion
  • Medicare Parts A&B – $31 trillion
  • Medicare Part D – $7.2 trillion
  • Miscellaneous – $2 trillion

This is the amount of money our nation should have put aside as of today to meet future obligations, mostly on the entitlement programs. How much of that $62 trillion have we actually saved? Absolutely nothing! Other than four years in which we experienced surpluses while Clinton was in office we have had a deficit every year going back to Nixon and every year afterwards up to the current administration. To pay that back in its entirety that calculates to over $200,000 for ever single man, woman and child living in the US. That number nearly triples if it figured only on taxpayers.

How on Earth could this have happened? Who let it happen? It boils down to the actions and inactions of exactly 555 people every year. I will post an article that someone forwarded to me that explains this better in one of the comment boxes later and you’ll see what I mean. Basically, this is financial irresponsibility of the greatest possible scale. Year after year, politicians have burned the candle at both ends. They have given the public everything that they have asked for and more. They wanted tax cuts. Sure thing.  They wanted increased benefits. No problem. We fought two concurrent wars, so that we could fight the terrorists over there, instead of over here, and at the same time not raise taxes to pay for it. Easy, we could do that, where’s the credit card?  Anything to make sure that they got re-elected. When it came time to pay for all these things, they had a choice; tighten our belts or kick the can down the road. Which option do you think politicians most often chose? You got it – kick the can. They’re quite good at it too.  Not just at the federal level but at the state and local levels as well, but that’s another story for another post, however.  Munis are the next three alarm fire coming up on us quickly.

At some point this piper needs to be paid by doing the exact opposite of what has been done up to this point. We need to both cut benefits AND raise taxes. Most people are okay with the general idea of cutting benefits, but once you start polling them with what things are okay to cut, things start to get tricky. Our two biggest expenses are the mandatory entitlement programs like Medicare and Social Security. However, when you mention touching either of these, senior citizens get up in arms. Considering that older people represent the largest collective voting bloc in the country it is almost akin to political suicide to bring something like this up. So the next biggest expenditure is defense, but once you start talking about cutting from its budget, your political opponents paint you as unpatriotic and infer that doing so would put our troops in harms way. So, most people start talking about mino discretionary spending for things like NPR, the National Foundation of the Arts, Planned Parenthood, financial support to other countries and the like. However, all of these items have such relatively small budgets, that even if you cut their funding completely, it would only be a drop in the bucket for what we need to become solvent. Only shaving $100 or $150 billion off the budget, when you currently are behind $62 trillion, is the equivalent of pissing in the wind. It’s a good start but not nearly the kind of radical response that is needed at this point in time.

The other issue of raising taxes is even more of a hot button with people. No one wants to pay more taxes and if you asked most people they would say they’re already paying too much now. What’s crazy about that is that our current tax rate is at its lowest point in the last 50 years. When people say taxes are too high the question should be asked “In relation to what?” Too high compared to what you paid last year? No, it’s the same. Too high compared to what you paid 10 years ago? No, it’s lower. To 20 years ago? It’s way lower. Most people aren’t aware of this, but at one point, this country’s tax rate for the top tax bracket was 94%. For many, many years it was in the 70+% range. Now the wealthiest Americans only pay 35% and there is currently a bill that passed in the House and they are trying to pass in the Senate to lower that rate to 25%! Why??!!! The argument they make is that they’ll cut out some loopholes, which is a good idea, but why on Earth would we consider lowering the tax rate to the lowest it’s ever been since the tax code was first introduced when we’re in a financial hole so deep we might never climb out of it? If I can access all these figures to show this is untenable in just five minutes on Google, why can’t our Congressmen and women, or members of their staffs, be able to do the same thing? They don’t want to just kick the can down the road; they are suggesting a solution that would actually make the problem worse. A person hardly needs to be brilliant to figure all of this out. They just need a rudimentary understanding of basic mathematics. The craziest part of this situation is that those who are the so-called fiscal conservatives are the ones offering up the most financially irresponsible ideas. It’s like they came down with Mad Cow disease which has affected their rational and cognitive thinking. We need more tax cuts right now for wealthy people like we need a hole in the head.

Let me put this into another perspective and scale it down as if it’s the budget of a family. I’ll use the projections for this year, 2011, from revenue and expenses and just move the decimal point to get it down to an average family’s income level. I will also show it in proportion to the current government proposals so you can see just how ridiculous they are. Here goes:

  • Income for the year – $44,600
  • Bills for the year – $61,600
  • Amount the family is in debt – $620,000 (where the majority needs to be paid back in approximately 30 years)

How is this family possibly going to make it? If this was your family budget, what would you do? If this family was a good friend of yours and came to you for advice, what would you suggest? Would you suggest that they just cut out a cup of coffee and a donut every day plus trips to the salon that would shave off about $1000–$1500 a year off their bills (because those are the equivalent numbers that members of Congress are suggesting we cut to try to balance the budget). This doesn’t seem like enough cost savings to me to get them back in the black. Not even close. Not only does it not come close to cutting their expenses below their income level, it doesn’t even touch that big nut they have to pay off that’s looming over their head like a time bomb. It will only add to that number and make it worse.

Might you suggest that they get a second job or just a better paying job that brought in more income? That makes a lot of sense. Well, what is the equivalent of raising income for our country? That’s right, it’s raising taxes. Would you ever tell a person in this situation that instead of raising income they should instead lower it (because, again, that’s what the current proposal in the House, and now the Senate is suggesting)? Take some time off and take it easy. Let your kids worry about the bills when they get older. Even though you spent all that money, why should you have to pay for it? Let them take care of it. This sounds ridiculous and just plain selfish, doesn’t it? Could you in good conscience ever recommend such a crazy idea to a friend in such bad trouble? Would you do that if it were you in this situation? Hell to the no. You would tighten up your bootstraps and get to work. You’d make sacrifices, even if they were horrible, because that’s what your family needed to do in order to survive. You could always put your head under a rock and pretend the problem wasn’t there (as our country has done for about 30 years now) but not so surprising, nothing ever seems to gets better that way. Unlike your teeth, this problem will not go away simply by ignoring it.

It’s not surprising that congressional approval dropped in the most recent Gallup poll to only 17%. It is the most ineffective branch of government by a wide margin, and party politics is the biggest part of the problem. They’ve lost site of the difference between political victories and real victories for the American people. What happened to the good old days when our representatives voted their consciences and not necessarily what their party leaders told them to vote for?

Let’s not let the voters off the hook either.  In the past, we voted for the smartest people with the most level heads. We trusted them to make the best decisions for us. Now we vote for people that we think are just like us. That doesn’t work. The average IQ of the people in Congress has dropped by about 20 points over the last couple of elections because we keep looking for the person we would feel comfortable having a beer with. When did that become one of the most important criteria? Also, I can understand the desire to take out the trash and make a clean sweep if we think they’re doing a bad job, but let’s replace them with the highest common denominator, and not people that couldn’t pass a citizen test if they were given one on the spot.

There are many parts of what I covered here today that really need to have their own separate posts written about them to get into
more detail. This is the macro but it’s important to cover the micro as well. There is a lot of great material to cover on the big three expenses of Social Security, Medicare and Defense that I will go over soon. I also would like to share some suggestions on what we can do to fix these fiscal challenges instead of just complaining about them. Let’s be honest: the kind of changes that we need to right the ship will be initially be incredibly unpopular and they’re going to hurt. A lot.  But they won’t hurt nearly as badly if we start addressing them now. The longer we wait, the greater the pain and the sacrifices we will need to make.

It’s about time for more people to be aware of what’s really going on behind the curtain and demand that our elected officials start actually doing something about it – not just giving us cheap rhetoric so we vote for them, because talk is cheap, but showing us action. If both parties would just stand arm-in-arm, and tell the American people that this is what’s necessary, then the people would go along with it. But when one party only wants to cut benefits, and the other only wants to raise taxes, then we’re not going to go anywhere. They have to realize that they are all in the same boat, not two different boats. It’s time to start rowing in the same direction, and not in two opposite directions, and it’s up to us to hold them accountable until they do.

As usual, I welcome all of your questions and comments.  Please post replies within the blog instead of on Facebook or Twitter.

Advertisements

17 responses to “The Ever Growing National Debt and Its Ramifications

  1. Robert Bamford

    Outstanding

  2. DVD, Very nice work. I don’t think that there really is a political party for you at this point because by using actual logic you are in direct disagreement with both Democrats and Republicans.

    The answer is easy, we’re going to default on this debt. It will not be paid back, we will not make the tough choices. Everyone wants to make sure that they get “theirs” and no one wants to participate in a shared sacrifice for the sake of the country. The math just doesn’t work at this point. We’re at the point of no return, it’s just too big of a problem for us to tackle.

    The real deficit in this country is the deficit of leadership and that is what assures our demise.

    If I had to lay this problem at the feet of anyone I would blame two democrats and two republicans for this mess:

    FDR: Did a lot of things right in his four terms including saving the world from total dictatorial rule however his answer to the great depression included programs that would eventually bankrupt us.
    LBJ: Great Society. All the benefits, none of the costs. Once implemented, nearly imppossible to reverse. Most of the reason that we’re in this hole are programs that were implimented under his watch.
    Ronald Reagan: In simple terms, cut taxes and build up military spending to “Win the cold war”. Sounds good if it’s temporary but as you know it’s very difficult to get approval to subsequantly raise the taxes again once the recession is over and the war is won. Also difficult to abdicate for reducing military spending after the war.
    George Bush: Fought two wars, reduced taxes, didn’t veto a single Republican spending bill despite the return to deficits immediately after 9/11. Had a chance to create momentum for the two or three years of surpluses that were created in the late 90’s but chose to piss it away.

    There are so many more that could be listed but I really don’t blame congress. Those folks are not leaders, they are representatives (especially obviously in the House). They are weak people with weak leadership and no thought about the long term implications of their policies to our nation.

    The president has to lead. The president has to challenge America and persuade the people in a way that convinces our country to accept the responsibilities and sacrificies that need to be made in order to have the society that we have.

    Our leaders have ommitted facts, intentionally mislead and completely lied and the worst part is, we all know it! So has there been a revolt, or a massive uprising in response to this?? Of course not, we’re too busy planning our next vacation, buying a new car, paying for private school and trying to make sure our back yard looks better than the neighbors.

    As I said at the top, this will have a tragic ending, and very soon. We will default on this debt and this country will never be the same.

  3. I must say I’m a little confused, D. I see a lot of your comments that certainly indicate you’ve done a lot of research, and that you like to check your facts also, but I think you may be a bit conflicted. First, I honestly don’t know how you can reconcile the ‘Fisco’ side of your political philosophy and still be an Obama supporter. And as I also agree with you that we should all hold our politicians to account for their misleading statements, I think that should certainly apply to our president, but he is routinely given a pass by most media outlets. I’ll paste a list of Obama’s falsehoods at the end of this, but I’d also like to clear up a much touted and entirely mythical notion that you echoed on this post, and that is generally accepted as truth thanks to the collusion of media and politicians who have been parroting it for years. The ‘Bush Surplus’ is a farcical CBO projection that used assumptions that were based on 1990’s bubble market conditions, no market swings, no terror attacks, and discretionary government spending reduced to 1930’s levels. It was a farce, plain and simple and upon analysis it turns out that the Bush Tax cuts (which are commonly blamed for the deficit) accounted for only 14% of the total swing in the deficit.

    http://online.wsj.com/article/SB10001424052748704738404575347302831199046.html

    As for Mr. Obama, I must respectfully but strongly disagree with you that ‘he’s done a pretty good job’ , unless a good job is now defined by being generally totally dishonest.

    http://obamalies.net/list-of-lies

    Obviously this site is firmly slanted against Obama, and some of his gaffes are just that- innocent blunders, but there’s plenty here that should be of grave concern to anyone considering supporting him. I certainly hope that voters will pay more attention this time around, and recognize the need for MUCH smaller government. That’s ‘fisco’ to me in a nutshell, and I just call it Libertarian.

    • Gary, let me address your concerns/questions one at a time. First, how can I be a “fisco” person and still like Obama? This is a two fold answer. First off, following closely the voting patterns of Democrats and Republican over the last 30 years, primarily the people that actually make it into the oval office, I have found that, despite the rhetoric to the contrary, more Democrats tend to vote more fiscally conservative than their Republicans counterparts do. While Democrats are often decried as ones that tax and spend, Republicans have been doing something far more reckless. They have been cutting taxes and spending and thus my comment about burning the candles at both ends. No one was worse at this, probably in the history of our country, than Bush 43 (Dubya). Also, just looking at the results over the same period of time, only one president managed to have a balanced budget and he happened to be a Democrat (despite what can hardly be called a CBO “estimate” 12 years after the fact).

      The other factor in regards to Obama is that he has taken far too much heat for fiscal irresponsibility (I guess from the liberal media I keep hearing so much about) than he deserves. It’s often mentioned that he spent $3.5 trillion over budget already in only two and a half years. That is a technically correct statement where that much money has been over spent during his term. However, this fact is being manipulated by Republicans and the conservative pundits to make it seem like that full amount is all his doing, when it most certainly is not. The vast majority of that money has been spent by things he had no part in. What he is mostly responsible for are: The stimulus package, the troop surge in Afghanistan and him agreeing to extend the Bush tax cuts for two more years in exchange for extending unemployment benefits (I’m sure there are some others but these are the biggest ticket items).

      The stimulus was the biggest expense at $787 billion however as of the end of last year, according to the CBO, it created or saved somewhere between 1.4 and 3.3 million jobs where the income tax revenue from that group partially offset some of the cost for it. Also, only about 70% of that money has been spent yet so more jobs, and income tax revenue, should still be forthcoming. I don’t know how much the Afghanistan surge cost but since he eliminated the stop loss program and brought roughly the same number of troops home from Iraq I can’t imagine the net cost was too great (and while some Republicans may be starting to sing a different tune about it now, they were overwhelmingly in support of it when he made the decision and almost unanimously voted for the increased funding to cover thus making them partly culpable in the expense).

      The last piece about the extension of the Bush tax cuts I think optimizes how Republicans can hurt the government’s P&L sheet and make it harder to get out of this debt that we’re in. All everyone had to do was let them expire and we would have had a much lesser deficit over the next two years (or longer if they get extended again which I fear they will). The total cost and/or loss of revenue from the decision over the next two years is $860 billion. The parts that Obama pushed for were an extension of unemployment benefits which cost $56.5 billion and some additions of individual tax credits for low to middle class families which cost an additional $8.3 billion. What did the Republican’s want? An extension of all previous Bush tax cuts for $544.3 billion, a Social Security holiday by dropping 2% off of FICA for $111.7 billion, business tax breaks of $69 billion and a raise in the estate tax ceiling coupled with a reduction of tax rate from 50% to 35% for $68 billion. So who was more fiscally irresponsible there? Which party pushed us farther in debt? To one of my original points in my post, it’s all about the math.

      Not that Democrats can totally duck this one. Just as Republicans were partly culpable for the Afghanistan surge so were the Dems with this extension. Obama’s biggest mistake was going along with it considering this vote was held during a lame duck session where Democrats still held a majority in both houses and the White House. His fault was compromising too much for those unemployment extensions he really wanted plus how contrite he felt from the voters who solidly handed his party a spanking in the 2010 elections. That shame didn’t push him to the center, because let’s face it, he’s already very central no matter what you hear on Fox about him being a socialist, it actually pushed him pretty far to the right to agree to all those things with so little received in return (and it went against a campaign pledge). So despite the fact that I like Obama quite a bit more than the motley crew the Republicans have offered for our consideration this upcoming election, I hardly think he’s perfect. Nor has he always made the best decisions.

      The rest of that $3.5 trillion was spent before him or by people other than him. By before him I mean like Bush signing every single Republican spending bill put on his desk, three subsequent unfunded tax cuts, two wars (which he was the only president in US history to ever out troops on the ground without raising taxes to cover the cost), the largest ever expansion to Medicare with the passing of Part D which is projected in 40 years to exceed the cost of all of the rest of Medicare combined (again, unfunded. He waited until the month after PayGo expired to push this). Many of these things have rolled into Obama’s term.

      The cost of those two wars in particular Bush held off the normal budget and hid it in Supplemental Appropriations. When Obama moved it back where it belonged it added roughly a trillion onto the deficit that was not his expense (well, in fairness, I guess an argument could be made that it was for the last two and a half years). Lastly, a lot of the money that recently added to the debt has happened because of the Fed doing their two rounds of Quantitative Easing. Obama had nothing to do with that since the Fed is an independent organization. They neither work for him nor consult him before making these decisions. The total costs of QE 1 and QE 2 were $2.3 trillion.

      I’ve spent so much time covering just covering the first few lines of your rebuttal that I’ve lost some steam, and am getting too tired, to really dig into the part I really wanted to which is this notion of Bush coming into surpluses being a farce. David Walker spends a part of his documentary, and a whole part of his book, just on this alone which he backs up with hard data. Considering that he was the nation’s top auditor at the time that Bush took office I’m pretty sure the guy knows what he’s talking about. If you think the guy that wrote this Op/Ed piece in the WSJ is more qualified than the Comptroller General of the US then I think that’s a little crazy. It sounds you were just looking for someone to support your theory, and the fact that he writes for the WSJ makes him sounds credible, but that hardly automatically makes him right. It may not just have been the tax cuts that caused the deficit but when you add in the other parts about the many unfunded spending bills/wars/Medicare expansions he pushed through then it all ends up adding up to one incredibly fiscally irresponsible president who passed on a bunch of debt to his successor.

      Lastly, I have no doubt that Obama may have lied about some things. The question is what other president hasn’t? Name me one and I’ll find dozens of things they lied about with one Google search. To hold lying against a politician is like trying to blame a plumber for having pants that don’t cover his whole backside when he’s under your sink. Reagan said “Trees cause more pollution than automobiles do.” Bush 41 “Read my lips. No new taxes!” Clinton “I did not have sexual relations with that woman.”. Bush 43 said Iraq had WMDs and ties with Al Qaeda (some people contend this wasn’t a lie but clearly he wanted to have that war and took the flimsiest excuse he could find to do it which isn’t that much different than lying). The list goes on and on.

      The question just boils down to how many lies are told, the size of the lie and the repercussions. If we go to war over a lie, that takes thousands of American servicemen’s lives (and over a hundred thousand Iraqis, that for some reason very few people ever make a big deal about) and costs over half a trillion dollars then that kind of lie is a big problem. When Obama says no “boots on the ground in Libya”, and gets called a liar because the CIA is there (coincidentally, they’re in every other country in the world as well), then that not what I call a big lie (if it even can be called a lie at all considering boots usually means servicemen).

      So Gary, the reason I like Obama is because I do my homework. The facts support him far more often than they don’t (and far more than they do for Republicans who I find consistently vote far more often for the benefit of big business and the top 2% of income earners which ends up being often to the detriment of this country).

    • Really? An op-ed from a right winger as your “proof” that Bush didn’t inherit a surplus? Really? I’m trying to type as I laugh and trust me, it’s not easy. An op-ed. COME ON MAN!! The thing is an “Opinion Editorial”, hence, “op-ed”. Let’s ignore the facts that DVD so fully fleshed out because some guy wrote an opinion piece that is contrary to EVERY other factual accounting done by actual reputable people who know what they are talking about. But hey, a guy wrote an op-ed so let’s just believe him and ignore the facts. SOP for the GOP these days.

      • T.J.,
        I didn’t see any supporting references to the claim that the op-ed was “contrary to EVERY other factual accounting done by actual reputable people who know what they are talking about. “. Who are you referring to exactly? Back when Bush was proposing tax cuts, his opponents also cited the faulty CBO projections when arguing against the cuts. So if you don’t care for the WSJ editorial page, that’s fine, but to say that he’s just
        ‘some guy’ and everyone else disagrees with his crazy idea, do a little searching, and think about exactly what the ‘surplus’ was based on. Do you really think that the CBO projections were realistic?
        I posted the WSJ editorial because it looked easier to digest, but perhaps something more technical is what you’d like to see?
        Here’s a deeper analysis from the Economic Policy Institute that was often referred to by Bush opponents :
        http://www.epi.org/publications/entry/issuebriefs_ib154/

  4. I really do appreciate your thorough approach here. I also think that you are being entirely sincere in your analysis, and there’s no doubting the seriousness of your concern. When I have more time I’ll respond further, but for now, I just wanted to comment on one element: ‘jobs saved or created’ ? It’s difficult to proceed with any kind of debate when the basis for discussion includes is predicated on this type of fuzzy math. We can probably spend the rest of of eternity discussing the ‘non-partisan’ charter of the holy CBO, but aside from kool-aid drinkers, I’ve yet to see anyone credibly grant legitimacy to that goofy tagline. IMHO- ‘jobs saved or created’ is another patent example of mid-term electioneering by Obama, and goes hand-in-hand with the tasteless laughter that followed the gaffe- ” I guess those shovel ready jobs weren’t so ‘shovel ready’ after all! ‘ (ha-ha, very funny)

    • The jobs saved or created line I found on FactCheck.org and they found their info at the CBO about a year ago, so well before mid-term electioms. Some Republicans running in different districts in 2010 had said that the stimulus didn’t create us any jobs, and others went farther to actually say it lost us jobs (the exact same sentiment echoed by my father-in-law about nine months ago which, when I corrected him on it, has led to us not speaking since). Obviously anyone of any rational intelligence should know that you can’t have a job’s bill that costs $787 billion and get zero, or worse, a negative, amount of jobs out of it. That would be a robbery of biblical proportions and, if it was, where did all that money go? If it’s buried somewhere out in the dessert then I’ve got a shovel and am game for going to look for it.

      So there had to be some jobs created, it’s just a question of how many. The CBO gave such a wide posibility because it’s hard to track it all. Some of the money went to tax cuts so who knows what, if any, jobs were created there. A fairly large amount went to the states to help their budget shortfalls. That’s where the “jobs saved” comes into play. Many states have let a lot of state workers go in the last couple of years and the largest part of the money given to the states was to stop those layoffs. How much? Here are the numbers: The amount given to states was $58.355 billion. The amount of that number designated to the State Fiscal Stabilization Fund, designed to avoid cutbacks and layoffs, is $53.6 billion. That’s 92% of that money. Again, there is no question about the fact that jobs were saved otherwise where did all those billions go. The question just boils down to how many. Here’s a chart that shows a good stimulus money breakdown – http://www.propublica.org/special/the-stimulus-plan-a-detailed-list-of-spending.

      So I don’t personally think there should even be a question on the validity of the statement “saved or created” because jobs were definitely saved and created. If you want to disagree with the CBO’s number of how many jobs well then that’s another story. If you want to disagree with how the money was allocated then that makes a fine argument too. Or how much money was spent and how it affected our national debt. Or of those jobs, how many of those will last over five years. All of these are great questions, and time will have to tell on some of them, but they make for much better logical discussions than wether the stimulus actually did have an effect on jobs.

      Regardless of all that, they got some results and saved many American families from bankruptcy or losing their homes. It also helped stimulate the economy which could have been a contribution factor, together with TARP and the Quantitative Easing programs, from keeping our Recession from possibly becoming a Depression. Who knows because we can never get the opportunity to see what would have happened if we made a right instead of a left but all the signs are pretty positive that we narrowly avoided a disaster, regardless of it’s scope.

      Lastly, on the part of shovel ready projects, yes the president was wrong. What I admire about him, though, was that he admitted he was wrong about it. It takes a big man, and an even rarer politician, to do something like that. How many other politicians can you recall ever doing so in any other situation, even when they were clearly in the wrong (i.e. Bush 43 on Iraq), other than when they get caught cheating on their spouses prior to resigning? I can’t think of any right now off the top of my head. Some look at apologizing as a sign of weakness. I think it’s the sign of someone that is mature, honest and of strong character. Something that is a characteristic of a person I would be proud to vote for for the presidency of the United States.

  5. DVD, Please tell me you don’t believe all of the stuff you’re writing. While it may be factually correct, both sides are very good at selecting the facts that they feel best support their argument. Get your application in at MSNBC, they could use a guy like you.

    Obama and staff stated at the time of the debate over the stimilus that unemployment may well exceed 8% nationally if we do not pass the stimulus. We passed the stimulus and the net result was that unemployment has been over 9 percent 22 of the last 24 months.

    If we trust the CBO and take a figure of 2 million jobs saved or created then we would arrive at a cost of approximately $393,500 for each of those saved / created jobs. Once the funds run out, many of those jobs will be gone. Given our out of control national debt which was the original topic of this discussion, seems rather wasteful.

    His signature piece of legislation is under attack in almost every state and almost certainly will never fully become law of the land. And imagine, when we finally cave and grant citizenship to the 12 million here illegally what the cost of this program will be. Folks that are all too poor to even pay federal taxes will now get free health coverage. I’m sure that won’t add to the tab at all!

    The good news is that Obama has a plan to reign in our debt. He wants to raise taxes on all of the private jet owners like me. Yes, that’s right, my wife and I on a little over $300,000 a year with a $70,000 or so yearly federal tax bill were able to go out and purchase a corporate jet. You know, they only run about 10 million but I figured if The President puts me in the same category financially as Bill Gates and Warren Buffet that I guess I can afford it. Class warfare at it’s finest. He stands there and attempts to convince the masses that the root of our financial problems is that the fact that the fat cats are paying enough of the tab not that we have out of control entitlement and military spending that has exploded to unsustainable levels in the past 10 years.

    You’re right, he was irresponsible to extend the tax cuts. He had a majority in the house and senate and all he had to do was sign the fucking bill and he couldn’t even find the spine to do that. He was worried about $56 billion in unemployment benefits not being extended so in order to preserve that he signed off on additional tax cuts that will cost far more than that. Again, back to a point I made several posts ago, The US Govt is not the failsafe for every person in America that can’t find a job. 99 weeks of unemployment benefits is ridiculous and unaffordable. I would have been fine if he had just said we’re letting ALL of the tax cuts expire and we can no longer afford to foot the bill for long term unemployment benefits. We just don’t have the money. We’re not being cruel and insensitive, we’re responding to the economic reality of our times which is that we’re broke.

    The bottom line, and I know that you’re a bottom line kind of guy is that when you look at the track record of this administration with respect to job creation, housing, fiscal responsibility and business growth this administration has failed miserably.

    I don’t blame Obama for all that ills us, many that have gone before him from both parties have been very willing to ignore the problems. But now, he’s in charge. The question is, what is his answer, what is his plan and what can he point to right now to say that he’s accomplished economically?? I don’t see much of a record to go on and I don’t see much of a plan.

  6. Well said, Brian. I was going to respond to Derek to agree that I acknowledge ‘jobs created’, but the question is ‘which jobs?, at what cost, and what of real value are these jobs producing?’ So much of the stimulus money went to operations that could easily be described as ‘non-essential’ , and who produce nothing but services. So many of them happened to just be political supporters of the biggest spenders across the spectrum. All of these 503b’s , dot orgs, quasi-scientific institutions and others that are likely nothing but shell-covering for favor-traders. The ‘Acorns’ are all over the ground!
    Meanwhile, we’re told that GM will go bankrupt if we don’t inject 50 B, and not only do the go bankrupt anyway, but with a flick of a judge’s pen the bankruptcy code is completely flipped backwards as SECURED creditors are dismissed, and the UNSECURED UAW perks are given top status. I’m sure the other umpteen million companies who went bust last year would have loved that little perk- but sorry, that’s for Democrat union buddies only. This one event is emblematic of the problems we face in Washington.

    The reality is that the federal Government machine IS the giant evil corporation- just use any adjective you would choose to describe one and you’ll see they all apply to Washington.
    And the tired old demagoguery – “if we don’t tax these oil companies and luxury jets, some kids aren’t going to be able to attend college this year”.

    It’s really getting old watching all off the finger pointing at the ‘millionaires and billionaires’ from the hand of the ‘Trillionaire’ himself.

  7. Gary, not sure why I can’t reply to your comment to me, there is no link there, so I’ll post it here. There are no supporting references because they aren’t needed if you live in this reality. Every major economist that weighed in did indeed say there was a surplus when Bush took office. And the article from the EPI never says anything to the contrary. In fact, if you read the article you linked too, it says only that basing tax cuts on CBO projections is risky. Not one time does it say a surplus didn’t exist. Not one time. In fact, it infers the exact opposite in the “Comclusion” portion of the article; “Since the budget surpluses forecast in this way may or may not materialize, to treat these surpluses as if they were real and allocate them almost entirely to permanent tax cuts is irresponsible.”

    Your WSJ article is written by a fellow at the Heritage Foundation. Is there possibly a more right wing organization at work on K Street today? I doubt it. And if you read the article with any sense of reason you laugh at Riedl’s comments like, “First, the wars, tax cuts and the prescription drug program were implemented in the early 2000s, yet by 2007 the deficit stood at only $161 billion. How could these stable policies have suddenly caused trillion-dollar deficits beginning in 2009? (Obviously what happened was collapsing revenues from the recession along with stimulus spending.)” Stable policies? Two wars waged at an expense of trillions per war is a “stable” policy? Or maybe the stable policy is the prescription drug program? Oh, right, very costly program with no tax revenue to pay for it, not that one either. So we cut taxes and spend trillions more than we bring in and I’m supposed to take his column seriously and not mock him as saying he’s contradicting every other economist? And he blames stimulus spending in the same paragraph as if Bush didn’t author the first stimulus bill and tried to slide it by Congress with a three paragraph (and saying paragraph is being generous) explanation of where the money was going. To top it off the entire article completely ignores all the spending done by Bush and his rubber stamp Congress as if it never happened and the reason we have a deficit is the CBO projections were off. That’s simply stupid so sorry bud, no dice. He deserves every ounce of ridicule I can lay on him.

  8. TJ,
    I also suffer from a mild form of dyslexia , so I sympathize with you, it seems your condition may be a bit more severe.
    Here’s the excerpt that you quoted in your response. Take another close read on the language:

    “surpluses forecast in this way may or may not materialize” – meaning they had not, and there was no certainty that they would.

  9. Wow, you read an article that speaks only to projected surpluses based on 2001 data (which infers an existing surplus) and you want to insult me because I point out that your article doesn’t support your argument? Well, at least I know I’m dealing with the standard right wing ideology, toss out links and act like you know what you’re talking about and when someone exposes you for a fraud you just insult them. Good to know going forward.

    And for the record I don’t suffer from dyslexia and if I did you would empathize with me, not sympathize with me. Sympathy is something you have when you feel sorry for someone or feel pity for them. Empathy is something you have when you feel a similar loss or share a similar disorder (dyslexia for example) or have experienced a similar loss.

    Having said that, I have a tremendous amount of sympathy for you.

  10. Ok, Professor Patch, let’s start from the start. In precisely NONE of your posts have you cited any sources, and yet have now labelled me a ‘right winger’ solely because I included some links to actual sources of information- whether you deem them reliable or not is up to you, but you clown yourself for making that accusation. I defy you to source your comment that ‘2001 data’ ‘infers an existing surplus’. Go for it- and while you’re at it, tell us who you’re referring to as ‘Every major economist’ in your prior post. So far, everything deemed true and accurate in your posts is according to T.J. Patch, no footnotes needed.

    Next, since you couldn’t just accept the ‘sympathy’ bit as the tounge-in-cheek comment that it was, and again failed to source your definitions, let’s just let good old Webster clear this up for us:

    Merriam-Webster definition of Sympathy: the act or capacity of entering into or sharing the feelings or interests of another b : the feeling or mental state brought about by such sensitivity

    Merriam-Webster’s definition of Empathy: the action of understanding, being aware of, being sensitive to, and vicariously experiencing the feelings, thoughts, and experience of another of either the past or present without having the feelings, thoughts, and experience fully communicated in an objectively explicit manner;

    Are you familiar with the term ‘Vicariously’ professor Patch? It means roughly to imagine yourself in another’s position, without really experiencing it.

    Here’s another from Britannica this time:

    Britannica Concise Encyclopedia’s definition of empathy: Ability to imagine oneself in another’s place and understand the other’s feelings, desires, ideas, and actions. The empathic actor or singer is one who genuinely feels the part he or she is performing. The spectator of a work of art or the reader of a piece of literature may similarly become involved in what he or she observes or contemplates. The use of empathy was an important part of the psychological counseling technique developed by Carl R. Rodgers.

    So once again, if we just defer to the unreferenced instincts, definitions, and analysis of Professor T.J. Patch, we’re left often with wrong or even contradictory information.

    • Okay, guys. I’m all for spirited debate but let’s keep the name calling to a minimum. Gary, I already listed a source in my original post. If you click on that link and watch that abbreviated video from David Walker it will cover that. I actually recommend that everyone check out that video. It’s interesting and educational. You won’t be disappointed or bored with the material.

      • It’s all good Derek. No animosity here, just pointed conversation. I hope the back feels better soon. I look forward to your next post. Have a good one man.

    • Gary, thanks for the compliment. I hold many professors in high esteem so calling me one is truly a compliment. As for my lack of cited sources, I already posted why there were none. Besides, you ignored Derek’s sources which were factual, accurate and non-partisan and instead responded with an op-ed from the Heritage Foundation, a link to far right wing website and an EPI Institute study that you thought supported your position but clearly doesn’t but which you still don’t comprehend despite my best professorial efforts. So what really would be the point of posting any links? We both know you’d just ignore them or not understand the content and respond with more non-supporting links and/or op-eds that fall far short in the factual arena. Either that or another inept joke or ham-handed “insult” intended as tongue-in-cheek (quick note: you can’t interpret tone and intent in the written word so calling someone a dyslexic and by extension an idiot doesn’t quite ring funny).

      As for your definitions, I’ll give you a link that might make it easier for you to understand the difference as this one actually gives examples because definitions don’t always explain the application of the words:

      http://www.diffen.com/difference/Empathy_vs_Sympathy

      I hope that clears things up for you.

      Last, hopefully, the label applied is based on your own words and links. If you’re not comfortable with how you’re perceived, a right winger, I can’t help you with that other than to offer some advice; don’t post far right wing op-eds and websites as your “source material” if you don’t want the reader to think you’re a right winger. And when someone else points out your “source material” is full of holes, ignores facts and makes ridiculous assumptions by ignoring those same facts, don’t reply with silly comments intended as jokes. Find better material that actually uses facts not opinions and the discussion will take a whole different path.

      Beyond that, I can’t really offer much more.

      Here endeth the lesson.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s