Spending? No Problem.

January 29, 2013

“We don’t have a spending problem.”

President Obama

When President Obama says we don’t have a spending problem, I’m reminded of the joke where the man says, “I don’t have a drinking problem.  I drink.  I get drunk.  No problem.”

Like the drunk, President Obama revels in the problem and has no intention of doing anything about it, even though the American way of life is at stake.

Consider what’s happened to the federal budget.  In President George W. Bush’s first year in office, the federal budget was $2 trillion.  The latest federal budget is nearly double that amount at $3.8 trillion (although, technically, we’re operating without a budget, because the U.S. Senate hasn’t passed one in years).

Sequestration, if allowed to take place, would cut $1.2 trillion out of the budget over nearly a decade (actually, $984 billion, since Congress is including money saved on debt service).  That amounts to about $110 billion a year.

But even if $1.2 trillion were cut overnight, the federal budget will still be bigger than it was in 2001.  Even accounting for inflation and population growth, using 2001 as a base, today’s budget would be $2.77 trillion.

A huge part of the federal budget that cannot be cut is the cost of debt payments, which for 2012 totaled nearly $360 billion.  That’s $360 billion that was not used to feed the poor, educate your children, protect the country or build new highways.  It’s $360 billion that provided no return whatsoever to the American taxpayer.

And unfortunately, federal debt is continuing to grow and will soon exceed $16.5 trillion.

That should worry all of us, as, sooner or later, someone will have to pay for it.  The bigger problem, though, is the cost of entitlements, which aren’t included in the federal budget.  Unfunded liabilities for Medicare, Social Security and pensions of government employees total $86.8 trillion and, according to The Wall Street Journal, are growing at a rate of more than $8 trillion a year!

Just to keep unfunded liabilities from growing would take every cent of taxable income available – and then some.  The Wall Street Journal recently ran a commentary, “Why $16 Trillion Only Hints at the True U.S. Debt,” that summarized the problem:

“When the accrued expenses of the government’s entitlement programs are counted, it becomes clear that to collect enough tax revenue just to avoid going deeper into debt would require over $8 trillion in tax collections annually. That is the total of the average annual accrued liabilities of just the two largest entitlement programs, plus the annual cash deficit.

“Nothing like that $8 trillion amount is available for the IRS to target. According to the most recent tax data, all individuals filing tax returns in America and earning more than $66,193 per year have a total adjusted gross income of $5.1 trillion. In 2006, when corporate taxable income peaked before the recession, all corporations in the U.S. had total income for tax purposes of $1.6 trillion. That comes to $6.7 trillion available to tax from these individuals and corporations under existing tax laws.

“In short, if the government confiscated the entire adjusted gross income of these American taxpayers, plus all of the corporate taxable income in the year before the recession, it wouldn’t be nearly enough to fund the over $8 trillion per year in the growth of U.S. liabilities.”

So President Obama says we don’t have a spending problem.  What do you think?

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