Posts tagged Deficit

The White House released its estimates for the total deficit over the next decade.  That number is $9 Trillion in additional national debt.

The deficit for this year alone is over $1.5 Trillion.  That’s 3 to 4 times last year’s deficit.  The CBO predicts that the debt held by the public as a share of GDP will grow to 67.8% in 2019 from the current 40.8%.  It keeps growing after that.  For the non-economists, that’s like getting a new credit card every time you max one out.  The amount you owe goes up faster than your income, and your ability to pay it off, does.

The increase in the deficit is largely due to increased spending, and the projections for increased spending are not credible.  Actual spending is likely to increase at a much greater rate than the projections use, at least as long as the current people run Congress.

The projections are based on an increase in spending equal to the rate of inflation.  This is laughable.  Congress has never limited itself to the rate of inflation, even when the Republicans first took control in 1994.  This was Congress at its most fiscally responsible.  (The Republicans quickly learned about the joys of pork.)

Spending in 2009 has jumped by 47%.  BTW, this spending increase would be AFTER Bush left office.  Obama needs to stop blaming the previous administration for deficits caused by out-of-control spending.  As stated above, his first deficit is 3 times larger than Bush’s last deficit. Stop blaming your predecessor for spending bills you signed.

Spending is slated to increase by 8% in 2010.  Much larger than current inflation.  Just ask those Social Security recipients that got no cost of living increase for the first time ever.  Why no increase?  No inflation.

Another absolutely astonishing prediction: spending falls between 2009 and 2012.  This is as credible as the used car salesman telling you the car was only driven by some old lady on Sunday.  Spending going down?

Another red flag, revenues as a percentage of GDP increases from 14.9% this year to 20.2% in 2019.  In case you wonder what that means, it means the Federal Government will be taking more of the money made by the American people.  In other words, tax hikes.

The prediction on revenues relies on ALL of the Bush tax cuts expiring (rich and middle class) PLUS 28 million middle-class tax filers being subjected to the Alternative Minimum Tax.  The Democrats say they’ll prevent this, but that may be as likely as them decreasing spending from 2009 to 2012.

The problem gets worse if you factor in the drag on the economy that will result from proposed policies, especially cap and trade.

Taxes on tobacco have already been raised under Obama.  An increase on alcohol is likely, followed by another possible tax on surgary drinks.  Then there are the Bush tax cuts that expire in 2010.  55% of these taxes effect small businesses.  Not continuing these cuts will increase taxes on small businesses.  Increasing the cost of doing business results in fewer jobs and hurts the economy (which in turn lowers revenues).

Then there are the new taxes being proposed, most in conjunction with the Health Care Bill.  There’s the proposed 1% surcharge on “the rich.”  Then there’s the tax on people that don’t have health insurance.  And in an act of government brilliance, a proposed tax on those that do.

There are also proposed taxes on companies doing business overseas, eliminating caps on the tax on Social Security benefits, and eliminating the deductions for charitable giving.  Etc., etc., etc.

Then there’s the effect of “cap and trade”.  This alone has the possibility (more like a dead certainty) of actually shrinking the economy.

A shrinking economy equals shrinking revenues.  Shrinking revenues equal ballooning debt.

That $9 Trillion Debt over ten years could look like chump change compared to the actual number.