Bloodbath

Wasn’t a crisis supposed to be averted with the stroke of President Obama’s pen merely a week ago? We were certainly told so. Democrats and Republicans were touting the genius of their two-tiered $2.5 trillion spending reductions. Republicans, wanting additional spending cuts, won a “moral victory” by changing the dialog in Washington. Democrats, not happy there were no tax increases, won a “moral victory” because no meaningful entitlement reforms took place. Investors (many of which are US taxpayers) are now down $2 trillion in personal wealth in merely three days.

As touted during the debate by many of us using simple math this deal was inadequate. It kicked the can down the road. Our core problems were not addressed. Most of the dialog in the media was short-sighted and bent through the prism of class envy without a shred of honest math put forward. Many on the Right, ignoring why they were elected in 2010, ran scared by an artificial deadline and presidential scare tactics. They feared Americans were going to blame them for asking their government to stop the runaway spending.

Here are some simple insights on the topic as you discuss with your friends America’s first debt downgrade in ninety seven years.

• No amount of taxation is going to fix this. Our Gross Domestic Product (GDP), or sum of America’s total output, is $14 trillion dollars. This is not total PROFIT but total output. Total PROFITS are much less than total output. Our national debt is $14+ trillion dollars. It would take a 100% tax on everybody’s output to eradicate the debt. Of course then we would all be bankrupt and living in tent cities as none of us would have any money.

• Revenue is not the problem. Revenues have more than tripled since 1965. Adjusted for inflation, in 2010 we collected around $1.9 trillion. The highest dollars ever received were just four years ago at $2.4 trillion. To believe revenue shortfalls drive our debt problem ignores common sense and is often bandied about by those who want more of a say in how other people’s money is spent.

• Spending IS the problem. We borrow 40 cents of every dollar spent. Congress has not passed a budget in three years. Spending is up 27% in two years. AFTER the recent debt ceiling agreement, our debt is expected to be just $22 trillion instead of $25 trillion. In the next ten years our economy would have to increase by 57% just to keep pace with the debt. We are on an exponential spending spree already.

• Reduce spending by 1% a year from 2010 levels for six years and your deficit is balanced. This hardly tells grandma to drop dead.

America is the Earth’s last great hope for freedom. We remain a beacon of light in a very troubled world. While our reputation has been sullied our spirit does not have to. There is time to recover if we face our problems honestly. We need politicians who will do the same.