More on the Budget

In an excellent article prepared for The Heritage Foundation, Brian M. Riedl provides yet more detail about the unsustainable levels of spending proposed by President Obama in in 2011 Federal budget.

The article points out that in FY 2007 during the Bush Administration, the Federal budget deficit was a (relatively) modest $162 Billion.  Only during FY 2008 and 2009 did the Bush deficits skyrocket as a result of measures taken in response to the recession and the banking crisis.  Now that the recession appears to be over and the massive stimulus and bailout spending is no longer needed, the Federal deficit should return to pre-recession levels, right?  Wrong!  Under the Obama spending plan, deficits remain at staggering levels through 2020, with almost all (90%) of the deficits resulting from increased spending.  Even when compared with President Obama's budget from last year for FY 2010, the FY 2011 budget reflects $2 Trillion in additional deficits through 2020 (see table).

President Obama must act to curb these massive spending increases and to reign in uncontrolled entitlement spending.  Every year that passes without these issues being addressed just sends our nation deeper into a financial hole.

The Obama Budget

Yesterday, President Obama presented his fiscal year 2011 budget to Congress.  Since then, every news organization and every pundit on every side have tried to parse the text to determine what it all means.  For certain, when The New York Times, which never wastes an opportunity to serve as cheerleader for Team Obama, calls the President's spending and debt levels unsustainable, they certainly must be so.

Shall we consider the numbers?  Here are a few to ponder:

• A deficit in the Federal budget of $1,270,000,000,000 (that is $1.27 Trillion) for the coming year, which is on top of the deficit of $1.56 Trillion during President Obama's first year in office.
• According to the President's own projections, after a short period of leveling off from 2014 to 2018, the Federal budget deficit will begin another cycle of dramatic increases beginning in 2019.
• The President's projected budget deficits over the next ten years cumulatively total $8.53 Trillion (and remember, these are just the deficits, not the total national debt).
• Total Federal revenues for FY 2011 will exceed $2.57 Trillion, an increase of 18.6% over Federal revenues for the preceding year.

In the President's remarks, linked above, he blames George W. Bush for the budget problems, continuing a trend that is growing old.  For example, he placed part of the blame for the current budget deficit on the passage of Medicare Part D (the drug benefit) during the Bush Administration.  However, he conveniently leaves out the fact that Part D was strongly supported by BOTH parties in Congress and that the version favored by the Democrats was actually much more costly than the version that was ultimately adopted.  And if Part D entitlement is to blame for a large part of the Federal budget shortfall, then why doesn't President Obama simply urge the repeal of the benefit?  The current budget belongs to President Obama, not President Bush, and he needs to take the blame for his own runaway spending rather than blaming it on the previous Administration.  And just so you know, I am not now, nor have I ever been, a supporter of the free-spending of President Bush and Congressional Republicans when they controlled the budget.  The same rules apply to all, and there is plenty of blame to go around.

We should not lose sight, either, that all of the numbers being pushed around by the Administration and others regarding the budget fail to consider the consequences of Federal unfunded budget liabilities, which add Trillions and Trillions more to the national debt.  According to David Walker, former Comptroller General of the United States, the current national debt figure of $12.3 Trillion that is quoted by politicians and news sources should actually be $45 to $50 Trillion more to account for unfunded liabilities from Medicare, Social Security and other Federal programs.  And you can also add to the bottom line the $6 Trillion or so that taxpayers are on the hook for as a result of the Fannie Mae/Freddie Mac takeovers.

Our government cannot continue to bury us under mountains of debt.  If the current trend continues, we will become a client state of China, to whom we owe all of that money.  (Do you think the Chinese know this fact?  I'm betting they do.)  Someone must step up and speak the truth:  entitlement spending must be brought under control.  We must stop borrowing our way out of economic hard times.  Creation of a massive new entitlement program in the form of Obamacare cannot be justified in the face of our current budget crisis.

A Mountain of Debt, and Other Thoughts for a Monday

When the The New York Times begins to care enough to write about it, the Obama debt situation must really be getting out of control.    Of course, conservative commentators, including me, have been sounding the alarm bells for a long time (IVM discussed the President's money troubles from its founding back in September).  The Times actually sounds like it is concerned today when it notes that an increase in interest rates above the current unheard-of levels will cause Federal debt service payments to skyrocket:

Even a small increase in interest rates has a big impact. An increase of one percentage point in the Treasury’s average cost of borrowing would cost American taxpayers an extra $80 billion this year — about equal to the combined budgets of the Department of Energy and the Department of Education.

But that could seem like a relatively modest pinch. Alan Levenson, chief economist at T. Rowe Price, estimated that the Treasury’s tab for debt service this year would have been $221 billion higher if it had faced the same interest rates as it did last year.

The national debt now tops $12 Trillion.  Increased debt service payments will continue to eat away at available Federal dollars unless the size of the United States' economy grows dramatically.

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Yet another recent event highlights an issue of enormous concern to me:  when will the Obama Administration stand up to the Iranians?  I have written a number of times about the President's unilateral decision to withdraw SDI from Poland and the Czech Republic, a decision that has direct implications to the Iranian situation.  And the President has utterly failed to address Iran's nuclear ambitions, a fact that creates security concerns for Israel, Eastern Europe, Iraq and India.  But why would a "progressive" American President ever want to abandon the moral high ground with respect to human rights and fostering democratic governmental institutions?  Yet the President has done exactly that, in a statement issued, of all times, on the 30th anniversary of the Iranian takeover of the American Embassy in Tehran:

I have made it clear that the United States of America wants to move beyond this past, and seeks a relationship with the Islamic Republic of Iran based upon mutual interests and mutual respect.  We do not interfere in Iran’s internal affairs.

Beyond the basic fact that this statement was issued on a date commemorated by Iranian's mad mullahs as a great victory by Iran over "The Great Satan", a couple of things jump out at me.  First, the President says in the statement that he seeks a relationship with "the Islamic Republic of Iran."  The "Islamic Republic" is the same government that is now run by the madman Mahmoud Ahmadinejad, who bullied his way to re-election by intimidation and murder.  Why could not the President simply have said that he seeks a relationship with the people--the ordinary citizens--of Iran?  And second, while the President was reaching out to a government run by institutional terrorists, the streets of Tehran were filled with thousands of protesters who risked their very lives to challenge the government of the "Islamic Republic."  Yet the President offered not one single word of encouragement to those brave souls.  Instead, he made it clear that Ahmadinejad should feel free to continue to beat, torture, imprison and kill his domestic challengers because the United States will "not interfere in Iran’s internal affairs."  How can the United States assert any sort of moral superiority when our leader refuses to utter a word of support for those who only want to enjoy the same rights of free speech, free assembly and free association that we enjoy here?

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Ah, the liberal dream that is socialized medicine appears to be dying on the vine of many branches that is the Democratic Party.  To please "progressives" in the Party, any plan must provide coverage for abortion and must include a government-run option.  To the so-called "Blue Dogs" of the Party, the public option is a non-starter, and the final version must show some fiscal restraint.  And while all of the Democrats want to raise our taxes--Democrats LOVE to raise taxes--the Democrats in the House cannot agree with the Democrats in the Senate over which taxes to raise.  So while Harry Reid was able to muster enough votes to move the bill to floor debate in the Senate, he is a looooooong way from herding the cats of his party into the same pen.

My biggest issue:  the pathological lying by Democrats in both houses of Congress over the actual cost of their health care "reform" proposals.  They continue to trumpet that health care reform will actually reduce the deficit over the next ten years.  And how could a Trillion Dollars in new spending possibly reduce the deficit?  Because the Democrats play a parlor trick with the accounting by counting ten years of revenue against only six years of expenses, thus hiding the true cost of their "reform."

And while the Democrats are wasting all of this time and effort on a "reform" proposal that will either (1) fail; or (2) doom the American people to a massive debt burden for as far as the eyes can see, unemployment is reaching higher and higher and higher.  It truly is hard to believe that a gifted politician like Barack Obama can be so tone-deaf when it comes to the actual concerns of the American people.  As his poll numbers continue to slip, he and the Democratic Party-controlled Congress are doing nothing--NOTHING--about the economy.

On Debts and Spending

No, the title of this post does not refer to my personal financial situation.  Instead, I have a reality check on our national debt and the effect of current runaway spending on our collective financial security.

"Yawn," you say?  Well then, just try to wrap your mind around the following numbers:

• The current unfunded liability for Social Security and Medicare amounts to $107 Trillion.
• The Social Security and Medicare unfunded liability is growing at the rate of $5 Trillion every year!
• Of the Social Security and Medicare unfunded liability, the greatest portion is due to Medicare, which alone accounts for $89 Trillion of the total.  The Medicare prescription drug benefit (enacted by the Bush Administration, which was no stranger to overspending) accounts for $17 Trillion of the Medicare liability.
• By the year 2054 (when my daughter will be approaching retirement age), the payroll tax rate for Social Security and Medicare Parts A, B and D will need to be a staggering 37% in order to cover then-current obligations to retirees.  And remember that the payroll tax does not include Federal, state and local income taxes, with total combined rates that can be as much as 40% in some states.
• According to the Congressional Budget Office, if spending on Medicare and Medicaid continues to increase at its current rate, by the year 2050, at current income tax rates, the entire Federal budget will be consumed just to pay for Social Security, Medicare and Medicaid.

Source:  "Social Security and Medicare Projections:  2009", National Center for Policy Analysis, June 11, 2009.

Now, if those numbers do not wake you up, try this one for size:  Obamacare, depending on the final form it takes, will increase the size of the Federal budget by $1 Trillion to $2 Trillion each year.  And the "savings" that will supposedly pay the cost is a myth.  The only way that the Baucus bill that is under consideration in the Senate would achieve revenue neutrality will be if all employers place all of their employees into the government-subsidized plan and then, get this, give all of the savings back to their employees in the form of higher wages!!  Oh yeah, that's gonna happen.

The next time someone says that Obamacare is just like Medicare except that everyone will be covered, ask them whether they have a clear conscience about turning their grandchildren into indentured servants who work for nothing except to pay the bills run up by their grandparents.

And lest you think that the Obama Administration and the Democratic controlled Congress only want to spend your money on Obamacare, you should consider that they have approved increases in domestic discretionary spending of 12.1% for 2010 alone.   The linked article reminds us that inflation is less than 1%, yet the Democrats are increasing domestic spending by 12.1%.  And the increase does not even include the expenditure of the so-called "stimulus" money.  When the stimulus money is included, federal agencies will receive, on average, an increase in their budgets of 57% this year.  And through the magic of baseline budgeting, the increases become a permanent part of the agencies' budgets.  So if a conservative Congressman wants to decrease the size of a particular agency's budget in 2012 by, say, a modest 5%, he or she will be decried by the media and liberal interest groups for taking away from programs that benefit the masses, even though the actual budget, taking into account the 5% decrease, would still be up more than 50% in a two year period.

So remember, even as millions of Americans have lost jobs and real household incomes have shrunk this year, the Obama Administration and the Democrats in Congress are having no trouble at all spending money we do not have on programs we do not need.