Tuesday, October 31, 2006

Government disaster is approaching...

Tim Zank is a smart Republican and a great participant of this blog. He strikes me as being both smart and well informed…

He has created a couple of posts asking me why I am so appalled by the fiscal ignorance of our politicians and the bleak economic future I predict.

This post will explain the problem… All of the statistics in this post come DIRECTLY from The Federal Government unless otherwise noted.

GDP is Gross Domestic Product. It is the easiest way to measure the size of the US economy. I think it is important for people to understand how much of the total US economy is spent by our Government. The more money the Government spends, the less money the rest of us spend…

Year % of GDP spent by Federal Government % of GDP spent by State and local
1947 14.8% 4.7%
1960 17.8% 7.1%
1983 (PEAK) 23.5% 10%
2003 19.9% 10.7%
2006 20.5% 10.8%

Since 1975 our government has spent an average of about 31% of the total GDP. During that same time the government has taxed at about 29% of GDP. This has caused the government to run at a deficit for a long time. This has caused the current National debt to approach 9 TRILLION dollars and most of the States, Cities, etc have their own debts to deal with that are not discussed here.

The Federal government spent the following percentage of GDP in 2006:
Total spent 20.5% of GDP
Total Entitlement Spending 10.9% of GDP
Spent on Defense 4% of GDP
All Other Discretionary Spending 3.5% of GDP
Interest on National Debt 1.7% of GDP
Homeland Security .2% of GDP
Katrina Relief .2% of GDP

The above does NOT count deficit spending for 2006. The Federal revenues are higher then expected, so we also borrowed another 1.9% of the total GDP and directly added that amount to The Federal Debt this year.

The above figures are taken straight from Federal Government sources and show a bleak picture for my kids and grand kids…

I am not sure which Party will be in power in a couple of years…

The Republicans are running national ads everyday talking about how The Democrats want to raise our taxes. If The Republicans retain power I think that taxes will stay the same and we will continue to spend more money and deficit spend. Spending has increased at an average annual rate of 7.8% per year under The Republicans…

If The Democrats regain power I think we will see a small increase in taxes and spending will remain about the same…

Assuming there is not a recession the economy grows every year. For the purpose of this next projection I am going to make some assumptions:

1. Federal taxes will stay about the same percentage as they have been in the past.
2. Federal spending will continue to grow at levels similar to that seen in the last 30
years.
3. The Federal Government will NOT cut Social Security, Medicare, or Medicaid until
the Country is nearly broke…
4. I assume the Federal Government will continue to deficit spend and will rack up a
massive national Debt rather then increase taxes or cut spending in any significant
way.

The below estimate uses the current actual projections used by The Congressional Budget Office for the next ten years. These assumptions assume that we will STOP spending a bunch of money overseas in Iraq or Afghanistan, that we will not start any new conflicts, that there will not be a major recession, and the Government will not start any new large Federal programs. Most importantly these assumptions assume that the Alternative Minimum Tax (AMT) will be allowed to eat into the middle class and not be fixed (NOTE this is a terrible assumption). These estimates also assume that the Government will start trimming spending on many items which has not historically been the case…

The projected national Debt will have risen to 18 trillion dollars. It will more then double in the next ten years.

The Federal government would spend the following percentage of GDP in 2016:
Total spent 21.5% of GDP +1% over 2006
Total Entitlement Spending 12.1% of GDP +1.3% over 2006
Spent on Defense 3.7% of GDP .3% under 2006
All Other Discretionary Spending 3.2% of GDP .3% under 2006
Interest on National Debt 2.3% of GDP +.6% over 2006
Homeland Security .2% of GDP No change

Today the United States has a GDP of 13 trillion dollars. Our debt is about 67% of our GDP.
The Congressional Budget Office is predicting a GDP of 20.8 trillion dollars. Our projected debt will have grown to 87% of GDP. In other words we will be even more in debt in ten years then we are now. We will be passing even more debt on to our children…

This ten year projection should scare the crap out of you! The assumptions of the CBO are way too optimistic and I think we will be in a worse position then they are projecting. I do not even want to think about what interest rates will be… They are assuming they will remain near historic lows forever…

Per the Congressional Budget Office:
The total cost of Entitlement spending will hit 18.9% of GDP by 2050 and Federal Program spending is projected to hit 27.6% of GDP by 2050.
The CBO projects that interest on the debt and deficit spending will consume another 9% of GDP by 2050.
So the CBO is projecting we will spend 36.6% of GDP per year. Note this assumes the economy grows by over 4% a year, no foreign conflicts, no new tax cuts, not fixing AMT, and that The Government will start cutting spending… Also they are projecting that interest rates will stay near historic lows for the next 45 years! None of which are a good bet unless we elect Libertarians…

I look forward to reading your comments…

15 comments:

Bobett said...

Mike,


I always thought GDP was the value of goods & services within a nation. Calculated by personal
consumption, Govern't expenditures, Investment spending
& Net exports.

It is 4th quarter-end, and as of friday, Oct. 27, 2006 the "advance" estimates of GDP which measures economic activity increased 1.6% in the 3rd quarter, after increasing 2.6% in the second.

* Imports accelerated
* Inventory investment turned down
* Residentional investment decreased this 4th consecutive quarter, largest decrease since
1991.
* Consumer spending for services and state & local gov. decelerated.

Real disposable personal income + 3.7 in the 3rd quarter.

Bureau of Economics Analysis, U.S.
Dept of Commerce (www.bea.gov)


I guess I am confused on your stats concerning GDP below:

"Year % of GDP spent by Federal Government % of GDP spent by State and local
1947 14.8% 4.7%
1960 17.8% 7.1%
1983 (PEAK) 23.5% 10%
2003 19.9% 10.7%
2006 20.5% 10.8%"

Are you talking about the percentages we spend due to timing
of wars and military expenditures
above?

LP Mike Sylvester said...

Bobett:

When I say the Federal Government is spending 20% of GDP that I am saying that 20% of the entire Nation's output is being spent by the Federal government...

Mike

Bobett said...

Thanks Mike,

I get it, sincerely hasn't it always been like this.

I applaud and appreciate your
efforts in a third party...
we could go for a fourth...independent.

Personally, I'm with you more than against your ideas. Change is
coming. As an independant free-thinker, I do not advocate the same doom & gloom that all parties seem to get off on.

Bobett said...

Remember the 80/20 rule.

80% of the people do most of the work, while the other 20% do nothing. Wait, it's the other way around, isn't it.

It will be interesting to see Mr.
Tim Zank's comments on your blog
since you highlighted and made reference.

Anonymous said...

I view the grubber-mint statistics skeptically ( to tone down my rhetoric). They have to put a positive spin in there, because the reality would cause revolution. Remember Ross Perot's charts of private versus grubber-mint spending??? Well it appears that the old codger was correct, and the disaster won't be so bad for the grubber-mint as it will be for the people that have to pay the bills- you and me.

What we need are 434 Ron Paul clones in the U.S Congress, and also 100 more in the Senate and the only way is to elect Libertarians to be seated there.

Please don't WASTE YOUR VOTE- - -use it to elect Libertarians.

signed,
One Radical Libbe-tarian

Stan Matuska said...

Wow! That's a lot of numbers to comprehend!

No matter the current GDP, I still believe the government could control spending. We don't need to raise taxes! We need to limit spending.

I think the government is too big to accurately spend and account for all the hard earned money given to them by the American people.

I believe Libertarians could best get our GDP percentages going the opposite direction.

Tim Zank said...

Mike, those can be some mighty sobering statistics and if they are correct it does loom large for the future.

Not being an economist by any stretch, or an accountant either, I can't really argue with your assessment but I would say I feel extremely confident in saying that a full 1/3 of the money spent by our government is totally unnecessary.

There is no doubt in my mind we could lop off 33% that just gets wasted....That's the part of this equation that has me livid.... everybody keeps spending MY MONEY on stupid shit.

The other part of this equation is:

I don't want my country bombed into the next life because of really bad decisions made by the likes of Pelosi, Reid, Kerry, etal.
I know damn well my tax bill (which is already freakin' horrendous) will only go up if the democrats win this round. It'll at least stay the same awful amount with a repub win.

Ah but I digress....Suffice to say I want fiscal responsibility to reappear...The Repubs have let us down bigtime, but the time to spank their individual asses is in the primary, not in the midterm...

Jeff Pruitt said...

So how many got spanked in the primary?

Tim Zank said...

Jeff, none did THIS time...we waited too long.....

LP Mike Sylvester said...

Tim Zank:

So if neither major Party agrees to reduce spending; which neither will...

Would you rather pay lower taxes now and pass on an outrageous burden to future generations or would you rather pay more now and pass a slightly less outrageous burden to our kids?

Mike Sylvester

Tim Zank said...

Mike, I believe one of the major two parties will in fact lower spending eventually. Obviously, I think it will be the republicans...I think this midterm is a wakeup call for them to get back to republican beliefs and values. If they don't then a third party will be inevitable and I'll support it wholeheartedly.

In answer to your question, yes I would rather pay lower taxes now and pass on a burden in the future, because if the dems get control, there very well could be NO future to worry about...an expensive future is better than NO future.

Bobett said...

Great information Mike,

Now that I have read the Congressional Budget Office’s (CBO’s) report on GDP spending; I would like legislative lawmakers in the Senate and House to reform the CBO. Ask, why can the legislative branches pass current budgets into future generations? There seems to be no enforcement
for legislature branches to limit spending year to year. We elect them. I for one would like them to do their job. If only our elected officials quit dilly dallying with non-issues. Where’s the legislative bill that requires reform in the House and Senate.

Simplify the CBO:
•Reform the federal budget process
•Enforce House and Senate to limit spending by 2/3 vote
•Annual caps on spending with enforcement
•Bring in the President earlier into the Congressional Budget Resolutions
•No more pork-barrel projects for any state/international country-set defined guidelines with limits
•Set aside an emergency fund each year with caps.
This is true and sad, but as you stated in your blog:
The Federal government spent the following percentage of GDP in 2006:
Total spent 20.5% of GDP
Total Entitlement Spending 10.9% of GDP
Spent on Defense 4% of GDP
All Other Discretionary Spending 3.5% of GDP
Interest on National Debt 1.7% of GDP
Homeland Security .2% of GDP
Katrina Relief .2% of GDP
All American's need to get their
head out of their arse.

Jeff Pruitt said...

The Democrats (Nancy Pelosi) have pledged a pay-as-you-go strategy. If they do not adhere to this then I would fully expect the American voters to throw them out in the next election. I believe very strongly that this is a new Democratic party that's going to sweep into power. I believe this new influx of candidates will begin to take over the party for the better. I know some of you might not agree but we'll see what happens...

Tim Zank said...

Jeff, that's just lip service to get elected...her history is not one of fiscal conservatism...

Bobett said...

Mike you bring up so many important issues,

I apologize if I have seemed harsh in anyway debating with you. I’m just as passionate in trying to understand the insanity and state of affairs our children will inherit. I’m learning and I making mistakes along the way trying to figure out how the system works.

“Stop the Overspending Act of 2006” Senate Report 109-283. It is under Active legislature S.3521. It’s the fix the Budget process bill because it’s broken. Excerpt, “The purpose of this legislature is to give members of Congress and the President the tools to force the federal government to live within their means.”

United States Senate under alphabetizes B for Budget, overhaul process. Direct Link:

http://www.senate.gov/pagelayout/legislative/b_three_sections_with_teasers/active_leg_page.htm#documents

I hope this will get you to the Budget, overhaul process Senate Report file, and then click on the PDF at:
http://www.congress.gov/cgi-bin/cpquery/R?cp109:FLD010:@1(sr283)

It’s a great read, long 152 pages, but it is active legislature and will be on Calendar 520.

As I understand this Senate Report, “Stop the Overspending,” will be discussed Nov. 9th, 2006 on the floor…front center. Excerpt, “Debate on the bills is limited to ten hours. Within the expected time-frame, the Congress would take an up-or-down vote on the legislation as a whole without amendment.”