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October 24, 2013

What if?

by Chris Feeney

What if the proof of the pudding were in the eating? Didn't know you were going to get a lesson on old proverbs, did you? I've heard the idiom as, "proof is in the pudding", but in essence the old saying meant you don't know whether food has been prepared properly until it is tasted.

Now I'm not going to taste what I've recently heard politicians shoveling regarding the budget crisis, but putting it figuratively I'd challenge readers not to simply believe what we are told, but to turn ourselves into the judge of the matter by testing it out.

The United States Treasury Department defines debt limit as "the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. The debt limit does not authorize new spending commitments. It simply allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past."

Did you know that the debt limit has been raised by Congress on 68 different occasions since 1960?

That's right, our leaders have voted more than once a year over the past 53 years to raise their own credit limits, under the premise that it is necessary in order to pay for legally obligated expenditures.

Unfortunately "too big to fail" is now an acceptable answer to the question of when does it stop?

According to a recent study by the Harvard University Institute of Politics, the average American worker is now on the line for more than $123,000 in government debt, as the U.S. national debt stood at $16.4 trillion to start 2013. If you spread that debt load over every single person, infant to elderly, we each owe roughly $53,000.

Are you okay with that? I'm not. I have a mortgage to keep up with and a business to finish paying for, not to mention college for three kids and if anything is left over after paying for health insurance, retirement planning.

That's why I was shocked to listen to the President take the stage following the passage of the latest debt ceiling hike. I was not surprised he would gloat about getting his credit card limit increased or point fingers at those who opposed him. But I did about fall out of my chair when he said this:

"Remember, the deficit is getting smaller, not bigger," he told the American public. "It's going down faster than it has in the last 50 years. The challenges we have right now are not short-term deficits; it's the long-term obligations that we have around, things like Medicare and Social Security. We want to make sure those are there for future generations."

The play on words here is deficit vs. national debt.

What the president said was, the amount of money we are spending that exceeds the amount of what we are bringing in, is declining.

What he fails to tell you is that between 2009 and 2012, the government overspent like never before.

As a matter of fact, according to the Harvard report, the national debt has increased 55% in less than four years. The report notes that in 2012, the federal government took in $2.47 trillion and spent $3.8 trillion, for a deficit of $1,330,000,000,000.

What the president is praising is the fact that $300 billion has been trimmed from the deficit. So he is saying that it is a good thing that we are only spending $850 billion more in 2013 than we will bring in.

What he is spinning is that in 2009, the first year of his presidency, the annual deficit was 10.1% of the Gross Domestic Product. In 2012, that number declined to 7.4% of the GDP, which is the largest percentage drop in 60 years.

So really what he should have said was, "I set the bar really high in 2009 with my overspending. We are adding to the national debt in record amounts, but I overspent so much in my first year that it makes my current overspending look like an improvement of historic measure. We are still adding to the $53,000 in debt each U.S. citizen has hanging over his or her head, but we are doing it at a slightly slower pace."

Guess it's a good thing I'm not his speech writer.

Don't just take my word for it. The Congressional Budget office summed it up in testimony before the Committee on the Budget, U.S. House of Representatives regarding the CBO's long-term budget projections that were released in the report The 2013 Long-Term Budget Outlook (September 2013).

"In brief, between 2009 and 2012, the federal government recorded the largest budget deficits relative to the size of the economy since 1946, causing federal debt to soar. Federal debt held by the public is now about 73 percent of the economy's annual output, or gross domestic product (GDP). That percentage is higher than at any point in U.S. history except a brief period around World War II, and it is twice the percentage at the end of 2007. If current laws generally remained in place, federal debt held by the public would decline slightly relative to GDP over the next several years, CBO projects. After that, however, growing deficits would ultimately push debt back above its current high level. CBO projects that federal debt held by the public would reach 100 percent of GDP in 2038, 25 years from now, even without accounting for the harmful effects that growing debt would have on the economy. Moreover, debt would be on an upward path relative to the size of the economy, a trend that could not be sustainedindefinitely."

This pudding tastes horrible. It's time for some new cooks.


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