The Financial Dilemma America Faces That No One is Willing to Solve – Let’s Do Some Math

Here are some numbers to consider that are mind boggling. It is important that you are aware of these numbers:

  • Our government borrows roughly 40 cents of every dollar it spends (Politifact)
  • In 2012 the government will take in about $2.17 trillion in tax revenue and spend $3.82 trillion – the difference is roughly 43%. That 43%  is the deficit for that year. So put in smaller terms, of every dollar we spend, we have to borrow between 39-43 cents to spend it.
  • Last November I posted this article (Eye Popping numbers Regarding our National Debt) that lays out how much we owe (now $16 trillion, how fast it has grown (nearly doubled in 3 years) and how much interest we pay on that debt annually – nearly half a trillion dollars in interest ANNUALLY! Agh!

Any of you who have ever made a budget know there are two ways to cut your debt. You have to either make more money (raise taxes) or cut your spending. Let’s say we cut 50% of our spending (from 3.82 trillion that would get us down to $1.91 trillion in government spending)…if we maintained our current tax revenues ($2.17) that is a surplus of $200 billion. Remember, the interest in our debt alone is just under $500 billion per year because even though we would be starting to pay it back we are still trying to pay off $16 trillion at $200 billion/year while the interest is $500 billion. That is like the interest on your credit card being $500/year and you are only going to pay $200 per year on it. Is your debt going to go down? Nope. That means we either have to make further cuts (basically impossible beyond the 50% haircut outlined above) or else use the other tool at the disposal, raise taxes to cover the $300 billion in interest we would be short each year. So let’s say you raise taxes by $1 trillion annually. Crazy…but let’s throw it out there. After the $300 billion in interest annually is covered, we would have $700 billion left over to pay on the debt. Let’s do the math $16 trillion/$700 billion = 23 years to pay off our debt.

That result is only based on these assumptions mentioned above:

  • 50% spending cut of all federal spending (have you ever seen the government cut any spending? Never going to happen)
  • Increase taxes $1 trillion (close loopholes, raise rates, etc)
  • 23 years to pay it back = the year 2035

We have to dig out of this hole and if we don’t start digging we aren’t going to make it. Additionally, someone has to make these tough decisions and no one wants to do it because both sides of the aisle or more interested in re-election and maintaining their power and influence than they are actually solving problems. This is very disturbing and it is time we get people in office across the board who will get something done.

The solution is also poisonous
Finally, here is the scary kicker. For the government to meet the above assumptions about cuts and tax raises would almost certainly tip us back into recession. The government makes up a decent percentage of our economy because as the government spends business here and abroad are the recipients of that money for their services. I haven’t been able to track down that number (this site says 28% but I don’t think it is that high). Our economy is growing at 2-3% per year right now but without the government spending that number would go negative (equals recession). So if you don’t cut anything and keep going like we are, our debt goes crazy and even the interest will be crushing (not to mention paying back a dime) and if we try to solve it our economy will go in the tank as it is relying on all that government spending and stimulus to stay on a level footing and not dip back into recession or depression. So who wants to pull the trigger?

Have a read of this article from the Washington Post today that says when governments start raising taxes and cutting spending, the damage done is even worse than they thought – IMF: Austerity is much worse for the economy than we thought

Here is an excerpt that has to do with what has been stated above, “Recent efforts among wealthy countries to shrink their deficits — through tax hikes and spending cuts — have been causing far more economic damage than experts had assumed.”

Last – remember, there are more ways to raise revenues than increase tax rates (which Jerry mentioned in the comments that even that can be counterproductive). If you can give businesses room to grow they will produce more tax revenue but we have been regulating them more than ever and being unpredictable with what the governments next  big move will be (think health care, stimulus, fiscal cliff…etc).


Cap and Trade Passes the House

This should be the last political post for a while. I just think there needs to be more awareness of what is going on and so I am doing my small part here.

If you don’t know what is going on with the cap and trade legislation you better wake up. Cap and trade is an attempt to put a cap on how much emissions can be put into the environment by companies in the U.S. A company is allowed by the government via permit to produce X-amount of pollution. If they go over that amount they have to buy more credits from companies that have excess credits. So those companies that are more environmentally friendly will make a profit off the polluters. That sounds pretty good, right? The problem is, this has far ranging implications. For instance, how are companies going to pay for these additional credits? They will charge more for their services, which will then be passed on to you. It is estimated that the average American household will pay an additional $1,600 to $3,200 each year. This is indirectly a tax that we will all be paying. This will also result in a much higher cost of energy including the gas you put in your car. What is more, it will cost American jobs as the cost of energy will almost certainly go through the roof.

You need to know what is happening. If this passes the Senate you need to adjust your family budget to expense out at roughly $2000 toward your power bill, gas/auto budget, etc to make sure you have enough put away to cover the coming increase in costs.

Fox news link

Emissions trading – wikipedia (read opening paragraph to get a better idea of how this works)

Also have a look at this post from Shane for more links along with this video of Warren Buffet on Cap and Trade that he shared.

Taxes Going Up in Smoke

During the campaign we were promised repeatedly that if you make under $250,000 you would not see higher taxes. Here is one quote from Sept 12, 2008 from then candidate Barack Obama – “I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.” Well, that promise looks like it is going to go up in smoke. Literally.

  1. They have increased tax on tobacco products, the vast majority of users make under $250,000. Before you say “oh that’s just the smokers…” there is a tax being proposed on soda and snacks too! I am sure there are at least a few people who eat snacks who make under $250,000 a year.
  2. Cap and trade legislation is going to tax us to death for a minimum of $165 per family and a max of $3000+ per family. By the way, the Democrats sent in a 300 page amendment to the bill last night with no time for people to read it. Wonder why…and nobody is talking about this. This will be one of the greatest tax increases in the history of our country and very, very few people have even heard of it, much less know what this is all about.
  3. President Obama wants to cut the amount of charitable contributions those making over $250,000 can give. That will hurt many churches and other organizations.
  4. If the health plan goes through your health benefits will be taxed. Isn’t that the very thing he got onto McCain for proposing in the campaign?

How is that for not being taxed if you make less than $250,000? What is even stranger is whether or not he is even going to hold to $250,000 or if the cutoff will be reduced – See this link.

And here is another tidbit for you from Glenn Beck today regarding Chris Dodd:

“Tonight on television at 5:00 I’m going to talk about Chris Dodd. You know this whole scandal of Countrywide and sweetheart deals? Well, they’ve been investigating Chris Dodd now for a year, we’ve been waiting for the report to come out. We found out earlier this week that Bank of America says that they haven’t released any of his documents because no one from congress has asked them for the documents and issued a subpoena. How can you investigate someone when you don’t even have the original documents? Why hasn’t a subpoena been issued? Well, we did our investigation. We found. Because the ranking Democrat has to issue it. He doesn’t want to issue it because he’s afraid what it will lead to. Well, isn’t that the point? What will it lead to?” (Link)

Maybe it is nothing…who knows. But at least let’s get the information and find out. I am with Beck on this one. I think we have corruption in our government all the way up to the highest levels.

What Will They Regulate Next?

I love my pickup truck. It is great for doing home projects and helping people move. I guess I have to say that I am a little irritated at the move by the Obama admin to make these trucks more expensive and raise fuel economy standards. I can’t afford a hybrid and don’t care to buy a tiny little car. What are people going to do who have large families? What will this do to small business who often have their own larger vehicles to haul things?

I think they have this all wrong. I drive a vehicle that gets about 16 miles to the gallon but I only drive it 100 miles a week. I am doing far less damage to the environment than an environmentally friendly vehicle like a prius that is driven many, many more miles a week. This seems a bit elitist to me to force families pay more for vehicles which could come out to at least $1300 more per vehicle but likely much more.

What do all of you drive and how would this impact your future purchases? Are you in favor of this type of legislation?

States Need to Spend Stimulus Responsibly

Did anyone else think Obama telling states they better spend their stimulus money responsibly was funny? On the federal level they can spend money on mice and tattoos…but you states better keep close watch on how you spend it. I think we have gone insane as a country. I also cannot believe how we are selling our future down the river to try to get some momentary economic relief. And what happened to the pledge of no earmarks? In the middle of one of the worst economic downturns our country has seen our legislative and executive branches are approving thousands of earmarks that they promised they wouldn’t do. I guess we should know by now that no matter how much hope and change we are promised that in the end they are all just politicians doing what politicians do best…spend our money for us and hope we don’t ever see any of it ever again.

Sorry for the rant.

Temperatures at Past Inaugurations and the Effects of Global Warming

Did anyone else here the guy say that it probably didn’t snow this year because of global warming? Was that Chuck Todd? It was 28 degrees in Washington D.C. at the inauguration so it could easily have snowed. Second, we are in the middle of a huge cold front that is freezing everyone out at record cold temperatures through much of the country right now. Last, have a look at some of the past inaugurations:

To compare temps at past inaugurations you have to look at 1937 and beyond. That is the first year inaugurations were held in January. Prior to that they were held in March. So lets look at the inaugurations sin 1937 and see if things have warmed up:

1937 – FDR (can’t find the temp but it was the rainiest inauguration of all time > 33 degrees) – warmer
1941 – FDR (29 degrees) – warmer
1945 – FDR (35 degrees) – warmer
1949 – Truman (38 degrees) – warmer
1953 – Eisenhower (49 degrees) – warmer
1957 – Eisenhower (44 degrees) – warmer
1961 – Kennedy (22 degrees) – colder
1965 – LBJ (38 degrees) – warmer
1969 – Nixon (35 degrees) – warmer
1973 -Nixon (42 degrees) – warmer
1977 – Carter (28 degrees) – same
1981 – Reagan (50 degrees) – warmer
1985 – Reagan (7 degrees) – colder
1989 – Bush (50 degrees) – warmer
1993 – Clinton (40 degrees) – warmer
1997 – Clinton (34 degrees) – warmer
2001 – Bush (55 degrees) – warmer
2005 – Bush (35 degrees) – warmer
2009 – Obama (29 degrees)

18 inaugurations:
15 warmer
2 colder
1 the same

Does that look like Global Warming is pummeling us?

Rick Warren, Obama, and What is Mainstream

So president-elect Obama picked Rick Warren to deliver the invocation at his inauguration. What is the problem? People are saying he is not mainstream enough…not even that. He is a radical! What makes him so radical? His conservative stances on abortion and same-sex marriage. A CNN article yesterday quoted the President of the American way, Kathryn Kolbert, as saying that someone who was “consistent [with] mainstream American values” should have received the honor [Link]. She went on to say that Warren’s ideas were “radical.”

The headline was that this attempt was so shocking that it was stirring up outrage! Outrage? About what? That someone disagrees with you politically? Grow up people! The attempt is to say that mainstream America will no longer put up with narrow-minded views like being pro-life or anti gay marriage. They are saying that is just not mainstream anymore to hold those beliefs. In fact, it is seen as radical. I don’t know about you but I think that is disturbing. Maybe that is becoming more and more true but I sure hope not. I sure hope we don’t end up with a country that because someone disagrees with your political or religious ideology that you become a radical and outside the mainstream. Or maybe it is a good thing to be outside the mainstream. I mean, isn’t that what God called us to in the first place was to be different? Aren’t we supposed to be aliens and strangers on earth…looking for a better home?

What do you think?