Sunday, September 26, 2010

Obama's Unfunded Consumption

Print More Money

Federal Budget FY '08 vs. '10

By: Larry Walker, Jr.

"Knowledge is an inherent constraint on power." ~ Thomas Sowell

Between fiscal years 2008 and 2010, federal government revenues have declined by $359 billion (-14.2%), and government spending has increased by $738 billion (+24.7%), thus leaving a 38.9% hole in the federal budget. In fact, in this fiscal year alone, our public masters will spend a total of $3.7 trillion while taking in a mere $2.2 trillion, which means that the Congress is spending 71.8% more than it is bringing in.

Do you think this might be a problem? If not, stop reading, and just vote for the nearest politician promising: more of the same. But if so, then how do we close the gap?

One way would be to raise taxes on the "rich", which would bring in around $700 billion over the next 10 years, or $70 billion per year. But under this half-baked plan, it will take 10 years just to pay for this years' increase in spending ($738 billion), and it won't even put a dent in our future estimated deficits ($1 trillion per year), nor the national debt which is currently $13.5 trillion (tic, toc, tic, toc, tic, toc....). In fact, with the national debt growing at approximately $100 billion per month, the prospect of robbing the most productive citizens (i.e. small business owners) of an additional $70 billion per year doesn't really amount to a hill of beans.

Common sense ought to tell us that unless either government revenue is raised by more than 71.8%, or federal spending is cut by the same, we will never again see a balanced budget, nor will we ever begin to put a dent in our ever growing national debt. So let's be real about it, when the economy is growing at 1.9% (i.e. not growing), the federal government has no basis for creating a spending gap of 71.8%.

Is all of this spending necessary? Do you even know where our money is going? Let's look at some of the key areas of concern, line by line (since Obama won't). I am not going to go into a lot of detail on each item today, the objective is simply to highlight some key areas of concern.

First, there is the budget function known as 'undistributed offsetting receipts'. Note that revenues from 'rents and royalties on the outer continental shelf' has declined by $14.7 billion, or -80.7%. Overall this area represents $6.5 billion of the current budget deficit. So did we stop charging fees for offshore drilling, stop drilling, or both? How will we make up the shortfall?

Next is the area known as 'allowances'. Allowances? We are adding $18.7 billion to the budget for 'Health Reform', the so called 'Jobs Bill', and for 'future disaster costs' at a time when there is already a $13.5 trillion national debt, and a $1.5 trillion budget deficit. How are we paying for this?

Next is the area known as 'general government'. Do we really need to increase the budget for 'general government' by 44.1% at a time when government revenues have declined so dramatically. Of note, the amount spent on 'general property and records management' has increased by $1.5 billion, or 276.8%? Why are the amounts spent for 'central personnel management' being increased by 1566.7%; 'general purpose fiscal assistance' by 71.4%; and 'other general government' by 267.1%? The unfunded growth of general government adds another $8.9 billion to the deficit.

Moving on to 'Energy', we find an increase in the deficit of $18.3 billion, or 2,917.8%. Under 'energy supply' we have moved from a $418 million surplus, to an $8.8 billion deficit. Why? Does a change of 2,210.3% raise a red flag? And at the same time, we have increased the amount spent for 'energy conservation' by $8.7 billion, or 2,147.4%. Why? Overall, 'energy' represents an unfunded budget increase of $18.3 billion.

And then there's the area of 'income security' where spending has increased by $254.5 billion, or 59.0%. I understand that there are certain mandatory items that may be somewhat necessary, but here we see that 'unemployment compensation' has increased by $148.9 billion, or 328.5%, and that 'housing assistance' has increased by $36.4 billion, or 89.8%. 'Food and nutrition assistance' has also increased by $38.5 billion, or 63.6%. Although most Americans are sympathetic, the question is -- Where is the extra $254.5 billion coming from?

Then we come to the area of 'health' where spending has increased by $91.7 billion, or 32.7%. We see that the amount spent for 'health care services' has increased by $87.5 billion, or 35.3%. And the amount spent on 'consumer and occupational health and safety' has increased by 47.7%. Also included is 'Medicare' spending which has increased by $66.4 billion, or 17.0%. Again, the question is -- How are we going to pay for it?

Next, in looking at the area of 'education, training, employment, and social services' we notice a dramatic increase in spending of $51.2 billion, or 56.1%. Although there may be a desire to increase spending on 'elementary, secondary, and vocational education', a growth rate of 116.1% over 2008 levels is simply reckless. Let's hope that our children are learning something valuable such as, "do as we say, not as we do".

Then comes the area of 'transportation' which represents an increase in spending of $28.8 billion, or 37.2%. And we will pay for this by _______?

Next is the area of 'agriculture'. We are pouring an additional $8.2 billion, an increase of 44.7% into 'farm income stabilization', and 'agricultural research' while at the same time turning the San Joaquin Valley into a dust bowl. Notice the words 'income stabilization' (i.e. get paid to do nothing).

Then there's the area of 'natural resources and environment' which represents an increase of $15.2 billion, or 47.8%. Although there's some important stuff here, namely 'water resources', the question worth asking is: Why the big increase now, when we can ill afford it?

And lastly, there's the area known as 'international affairs'. We have increased spending overseas by $22.3 billion, or 77.2%. While some politicians falsely accuse other politicians of exporting jobs overseas, the federal government is itself guilty of exporting $51.1 billion of our future earnings overseas. Never mind that we can't afford it, we have increased funding for 'international development and humanitarian assistance' by $12.5 billion, or 88.5%; 'conduct of foreign affairs' by $2.9 billion, or 27.5%; and gone from a surplus on 'international financial programs' to a budgetary drain of $6.5 billion, or a change of 101.7%. Again, who's paying for this?

In conclusion, the federal government has created a 71.8% gap in its 'fiscal year 2010 budget', by increasing its own spending faster than any other growth rate on the planet. With U.S. economic growth at a mere 1.9%, it doesn't take a genius to figure out that we have a problem. The problem is out-of-control spending. No viable entity can spend money at a higher rate than it brings it in, and stay in business for very long. But, the U.S. Congress is not a viable entity. This congress is already $13.5 trillion in debt, and is currently on pace to spend 71.8% more money in FY 2010 than it will take in. It's time for this to end.

Government spending cannot and should not ever increase faster than either revenue growth, or the rate of inflation. Between 2008 and 2010, the annual rate of inflation was only 1.4%, and as stated above, government revenues declined by -14.2%. From a fiscally responsible standpoint, what justification was there for increasing government spending by 24.7%, and for outspending revenues by 71.8%?

Talk is cheap. Step 1: Get Honest. Step 2: Cut Spending.

Sources:

http://www.gpoaccess.gov/usbudget/fy11/sheets/hist03z2.xls

http://www.gpoaccess.gov/usbudget/fy11/sheets/hist02z1.xls

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