In Debt To Your Eyeballs

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October 1st marked the beginning of a new fiscal year for the federal government. The fiscal year is the 12 month period in which the bookkeepers for government track revenues and spending against a budget proposed by the President and adjusted and approved by Congress for this one year period. The deficit of the last year as of The Treasury Dept's. 3rd quarter reporting figures was 249 Billion 800 million or a 1/4 trillion dollars. The amount for the end of the last fiscal year is estimated to be 330 Billion dollars. But it is not domestic spending increases that caused this deficit. According to the Congressional Budget Office as reported by the CBBP (Center on Budget and Policy Priorities):

In 2005, the cost of tax cuts enacted over the past four years will be over three times the cost of all domestic program increases enacted over this period.
In other words, we would have a budget surplus this year if the President's tax cuts had not lowered revenues.

That is not to say the economy did not need the economic stimulus of more money in consumer's pockets, since the recession and rebound were reported to have been largely sustained by consumer's steady, and even increased consumption of goods and services. But, the tax cuts for the wealthy and corporations were unnecessary, as the wealthy continued to get wealthier. And corporations that were going to run into difficulties like GM with its pension plans or the airlines with their poor competitive business model and increasing costs of fuel were not going to be saved by any corporate tax cuts; while the corporations hitting record profitability numbers during these last 5 years would still have remained very highly profitable.

Yet, the President and Congress are moving toward making all of those tax cuts permanent even now, after the economy has regained its footing. Those tax cuts would dramatically increase deficits and our national debt, now standing at near 8 trillion dollars, if not offset by subsequent spending cuts. The amount of the lost revenue of those tax cuts would equal 1.8 trillion dollars through fiscal year 2015 according to the CBBP, just 10 years away, and this does not count increased interest costs for the deficit additions to national debt. In 2003, the President set Congress to attack waste, fraud and abuse in federal government programs. At the end of the process, the program was set to reduce spending from waste, fraud, and abuse by 104 Billion net. So the math states that the tax cuts less waste, fraud, and abuse still leaves a deficit totalling about 1.7 trillion dollars.

To offset the lost revenue, cuts in other programs like Medicare, Soc. Security, Education, or transportation and infrastructure will have to be made. Now some conservative bloggers will try to argue that the tax cuts will increase revenues. There is simply no objective evidence current, or historical, which supports that proposition. In fact, historical data support the opposite effect to some extent. The President's own Chairman of the Council of Economic Advisers Dr. N. Gregory Mankiw wrote in one of his books, Principles of Economics (Fort Worth, TX: Dryden, 1998), p. 29-30., there is "no credible evidence" that tax cuts can pay for themselves, and that an economist who makes such a claim is a "snake oil salesman who is trying to sell a miracle cure." Brookings Institute economists William Gale and Peter Orszag write:

Making the tax cuts permanent is likely to reduce, not increase, national income in the long term unless the reduction in revenues is matched by an equal reduction in unproductive government consumption expenditures.
Key words to understand here are "equal reduction in unproductive government consumption expenditures" meaning, waste, fraud, and abuse. And as we have seen, the 104 billion savings in waste, fraud, and abuse does not even begin to cancel the 1.8 trillion in lost tax revenues.

The US Government in the new fiscal year will owe those who invest in our government's debt over 8 trillion dollars. And about 40% of those investors will be wealthy foreigners. Eight trillion is 8,000 Billions of dollars, or 8 million 1 million dollar bundles. The average American in a family of four who brings home the bacon owes those investors, $106,203 dollars in future taxes. You say you don't have 106 thousand dollars lying around? Don't worry, your children will inherit your debt when they enter the work force and can pay it off with higher taxes out of their paychecks. This is the legacy politicians are leaving behind them. In addition to this, that same breadwinner owes those same investors an additional $3,518 in interest on that debt for just this year alone. With rising interest rates, that amount will grow every year for many years to come.

Want a real tax break? Demand Congress and the President get rid of the debt and then each and every working person in a family of four would get a $3,518 tax break in that year and every year after that, because that interest payment per breadwinner in a family of four would no longer be needed. Look, this is the oldest trick in the book. The government gives you a $400 tax refund per year through tax cuts, which adds to the national debt, which will increase your taxes or reduce your benefits by $500 a year later on when that debt and accrued interest have to be paid by you or your children. Call it voodoo economics or 'borrow and spend' economics, or whatever you like. The bottom line is the top 4% of Americans are making out great, and the rest of us are going to pay dearly for generations to come.

During these last few years, real wages and benefits from employment have been steadily tracking lower for the poor and middle class. Not only are wages and benefits tracking lower, but, you are paying record profits to oil barons and shareholders at the pump, drastically higher costs for Dr. visits and medications; your state taxes likely increased, and your property taxes definitely increased. Where is the gain? There is none, you are actually incurring a loss in disposeable income. The deeper this nation goes into debt, the deeper in debt also goes its hard working citizens.

This government and credit card companies knew record numbers of working Americans were going to get squeezed by downward wage pressures, loss of job based benefits, increasing state and local taxes as well as energy costs, health and food costs. They saw the writing on the wall. That is why the credit card companies and banks lobbied Congress for a bankruptcy reform bill that would prevent working Americans from being relieved of their debt, forcing them to repay it over decades of their working lives, making them even poorer yet, while credit card companies and banks reap unprecedented profits.

The solution is to create surpluses and pay down the national debt. There is only one way to do that and it is not the Democrat's or Republican's opposing half-way measures. That way is to NOT make the tax cuts permanent and cut the annual budgets back. But, beware which spending cuts. The President's budget agenda is focused on increasing spending on the military, foreign nation investments and military engagements, homeland security which isn't secure for the vast majority of Americans, and cutting back on everything else that benefits the poor, aged, disabled, and under/unemployed. The Whitehouse says its 2005 budget:

  • increases defense spending by 7 percent to support our military around the world, while pursuing the transformation of our military to ensure America has the best trained and best equipped armed forces in the world;

  • increases homeland security spending by 10 percent to strengthen capabilities created to prevent future attacks; and

  • holds the rest of discretionary spending to 0.5 percent growth, while continuing to increase funding for key priorities such as the Presiden'’s No Child Left Behind education reforms.

So ask yourself. Is it more important that we give Iraqis a better way of life while depressing our own quality of life? Isn't increasing homeland defense spending by 10% without securing our borders and halting illegal immigration a complete waste of your money, and your children's future earnings, not to mention their security in America? Do you really want to see your social security and pension plans made bankrupt while Afghanis are liberated to grow poppies and become the heroin producers of the world? Do you really want to continue funding No Child Left Behind when school districts and teachers and administrators across this nation have declared it a failed policy? We need to cut spending, but, we also need to prioritize what to cut and from whom.

We don't need a colony on the Moon and Mars when we are facing a bankrupt government in our children's lifetime. Put that program on hold until we have no national debt. Do away with no bid contracts in the name of war and emergency. Why can't the government obtain bids for contingencies? In other words, award bids to qualified low bid companies to be available in the event of another hurricane. This position of the Whitehouse that when you need it right away you must pay contractors whatever they ask at the time is ludicrous and enormously wasteful of our tax dollars. Recall the Transportation Bill and eliminate those billions of pork. This is the job of the President. It is his responsibility to act as a check and balance with his veto pen to halt excesses by Congress. But, the President appears to have no concept of what this debt and deficits mean and shows no signs of being committed to responsible government when it is needed most.

Want to stimulate the economy of the future? Send each taxpayer a refund check for $3,518.00. That is the additional amount each taxpayer could recieve in their paychecks if they weren't paying the interest on our national debt. This extra $300 per month per wage earner would stimulate the economy in a way no other government action could. And it would be a permanent yearly stimulus to the economy. But stimulating the economy is not the end all and be all of government's purpose. As long as government is taking our money, we should be demanding excellence for it.

The 9/11 attacks, the government's Katrina response, the completely misguided free trade agreements which continue to increase our trade deficits instead of reducing them, and now the upcoming attacks on government's contractual obligation to the elderly, veterans, and disabled through reductions and eliminations of Social Security, Medicare, and Veteran's benefits are all stark evidence that you and every other tax payer in this country is being hugely short changed by its government.

The President has proposed huge cuts in Medicare. He and Congress are intent on replacing Social Security with a plan that will eliminate employer contributions cutting our retirement savings in half. This is not excellence for your tax dollars. This is breach of contract with the people who have spent their lives investing in this safety net to secure them from poverty in retirement or disability. The problem is not with these programs, the problem is with the politicians who are mismanaging them. Passing a Prescription drug plan without requiring competitive bidding from pharaceuticals for those prescriptions is gross negligence and mismanagement.

Americans should be mad as hell over what is happening to them. But, by and large, this death by a million cuts of the American taxpayer appears to go largely unnoticed. A band aid here, a band aid there, taxpayers aren't aware of the precipice which draws ever closer with government ready to give the final shove over it, as job dislocations at lower wages, and ever sprialling costs of living in America squeeze the lifeblood out of the future health of American families. Everybody's talking details, but no one is listening to those decrying the big picture.

There is only one way left for American voters to force politicians to listen to their pleas for peace, security and prosperity for all in America, and that is by turning out to vote in 2006 and 2008 and making sure your vote is for anyone other than who is in office. Only by voting to kick incumbents out, will incoming freshman get the message. That message is "This land is our land, and Politicians work for us." Pledge to make your vote count as it never has before. Vote whoever is in, out. Politicians will get the message. The message could not be clearer or mistaken. The post election math experts who analyze the poll results will make sure of that.

Take the pledge. Add your name in the comments. Blog this article and link to it around the internet. Spread the word. Send your government the message it needs. Become one of the few who starts this boulder rolling down Capital Hill in a b-line toward wasteful, incompetent, and self-serving incumbents. We who know better, aren't going to vote for them anymore. We, the people who know better, are going to do our small part to take this country back from the political hacks. The many with small actions, acting as one can create huge changes. It is the only non-violent democratic option left to us. Let's make this happen for ourselves, and our children's future in America.

(Other debt and interest numbers courtesy of The US Treasury and The US Census Bureau by way of UWSA.)

4 Comments

Great post, David. I will certainly pass it on.

Mr. Remer, I couldn't read through the entire article. I caught the first half and the last 2 paragraphs. I agree voters are hopelessly ignorant of the issues and half of them can't cast an intelligent vote based on them. That is why American politics is all sleaze, spin, and one liners. I don't think your plan has a prayer. Too complicated to explain.

You are right, but, you can't sell it.

Jake, I appreciate your taking the time to comment. But, I wonder if what I have written could not be picked up by a political jingoist and reduced to something like "Vote the In Guy Out - Return America to The People".

That's what you are looking for as a selling point aren't you?

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This page contains a single entry by David R. Remer published on October 2, 2005 4:13 AM.

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