Be Very Afraid

If a picture is worth a thousand words, here’s a festschrift on Federal spending, from the Heritage Foundation. Browse.

And just for some perspective about the calamitous effects of the impending “sequestration” — upon which event, we are told, the sun will be folded up, the heavens flayed, the pregnant she-camels neglected, and Hell set ablaze — here’s one more picture:
 

 

20 Comments

  1. the one eyed man says

    It’s a misleading chart. When you use total federal outlays as a denominator, you are including things which cannot be cut (e.g., interest on the national debt), things which would be nearly impossible to cut (e.g., veterans benefits), and things which can be cut (e.g., food stamps, airline inspectors, and FBI agents).

    The sequester will cut 8-10% from the last group, which will lead to a degradation of government services. Your hyperbole notwithstanding, there will be longer lines at airports, fewer border patrols, higher unemployment, and so forth, all in a time when the government deficit is falling by $200 billion a year or so anyway.

    Posted February 27, 2013 at 11:23 am | Permalink
  2. As if no one suffers when you kick that can down the road, again.

    “Degradation of government services” is a plus. Elimination would be better.

    Posted February 27, 2013 at 1:07 pm | Permalink
  3. Malcolm says

    Outlays are outlays, and the amount by which we live beyond our means is a morally outrageous offense against future generations of Americans. If we can’t reduce spending any other way, and it seems we can’t, then bring on the “sequester”.

    I agree with Henry. For a great deal of what this government wastes our money on, “degradation” should be just the beginning.

    Posted February 27, 2013 at 1:41 pm | Permalink
  4. JK says

    I see no harm in trying it for a year or so – might hurt in some places, probably not so much in Arkansas. Maybe public transportation … wait … we ain’t got public transportation.

    Now if the sequester hits agricultural subsidies – Tyson’ll probably resort to laying off some of their illegal immigrants. Even then that wouldn’t be so bad – and Peter, they’d probably move back to California in which case you could finally get all your yard work done.

    Posted February 27, 2013 at 4:56 pm | Permalink
  5. the one eyed man says

    Thanks for your concern, but my yard is in immaculate shape, as I have mostly succulents who do the work for themselves. The redwood tree requires no maintenance, and when the plum tree yields fruit, the ones I don’t want lay on the ground until they turn to prunes, at which point the dog gets them.

    It is easy to assert that the government is wasteful in the abstract. We’ll see how many people share that view after two hour waits at the airport or the price of beef rises because there aren’t enough food inspectors.

    The chart is also misleading because spending in absolute terms is less instructive than deficit spending as a percentage of GDP, which has been steadily declining:

    2009 – 10.1%

    2010 – 9.0%

    2011 – 8.7%

    2012 – 8.5%

    2013 – 5.5% OMB estimate

    2014 – 3.9% OMB estimate

    Ideally the government would run a deficit which is just below its growth level, which would be in the $350-400 billion range. The gap between where we are and where we need to be is not nearly as large as those who have deficit hysteria would have you believe, and can be bridged by a combination of asset sales, revenue increases, and spending cuts.

    Posted February 27, 2013 at 5:11 pm | Permalink
  6. Malcolm says

    That’s “lie on the ground”. Just saying.

    From the CBO:

    The federal budget deficit, which shrank as a percentage of GDP for the third year in a row in 2012, will fall again in 2013, if current laws remain the same. At an estimated $845 billion, the 2013 imbalance would be the first deficit in five years below $1 trillion; and at 5.3 percent of GDP, it would be only about half as large, relative to the size of the economy, as the deficit was in 2009. Nevertheless, if the laws that govern taxes and spending do not change, federal debt held by the public will reach 76 percent of GDP by the end of this fiscal year, the largest percentage since 1950.

    With revenues expected to rise more rapidly than spending in the next few years under current law, the deficit is projected to dip as low as 2.4 percent of GDP by 2015. In later years, however, projected deficits rise steadily, reaching almost 4 percent of GDP in 2023. For the 2014–2023 period, deficits in CBO’s baseline projections total $7.0 trillion. With such deficits, federal debt would remain above 73 percent of GDP—far higher than the 39 percent average seen over the past four decades. (As recently as the end of 2007, federal debt equaled just 36 percent of GDP.) Moreover, debt would be increasing relative to the size of the economy in the second half of the decade.

    All of this assumes, furthermore, continuing low interest on our debt. Our debt-service cost is already so enormous that by 2015 or so it will be sufficient to fund all of China’s military expenses. If we start to see any inflation at all (not an unreasonable consequence of trying to print our way into a recovery), we’re even more screwed.

    CBO again:

    When interest rates rose to more normal levels, federal spending on interest payments would increase substantially. Moreover, because federal borrowing reduces national saving, the capital stock would be smaller and total wages would be lower than they would be if the debt was reduced. In addition, lawmakers would have less flexibility than they might ordinarily to use tax and spending policies to respond to unexpected challenges. Finally, such a large debt would increase the risk of a fiscal crisis, during which investors would lose so much confidence in the government’s ability to manage its budget that the government would be unable to borrow at affordable rates.

    We are a sick, addicted, morbidly obese nation, completely unable to control our appetites, and now we’re eating our seed-corn just to keep the binge going.

    Posted February 27, 2013 at 5:54 pm | Permalink
  7. Malcolm says

    Put it in the simplest possible terms: our debt is already over sixteen trillion dollars.

    Leaving aside what you consider to be acceptable levels at which this ungraspably enormous debt might increase, how can we possibly expect generations of Americans yet unborn, who had no say in this crushing obligation having been being created in their name, ever to be able to pay this money back?

    How on earth can anyone think that sticking our grand-kids with the astronomical bill for our decades-long binge is morally justifiable?

    Posted February 27, 2013 at 6:11 pm | Permalink
  8. “How on earth can anyone think that sticking our grand-kids with the bill for our decades-long binge is morally justifiable?”

    Leftists don’t need no stinking moral justification, dontcha know?

    Posted February 27, 2013 at 6:24 pm | Permalink
  9. the one eyed man says

    Right you are: lie on the ground. I might have added that I am lucky to have a garden which takes care of itself, as I have a black thumb. My morbidiy rate with plants would make Dr. Kevorkian envious.

    I don’t think you have thought through the implications of the CBO study which you cite. If the debt to GDP ratio reaches 2.4% by 2015, then it will have stabilized. In other words: you could leave things on auto-pilot and we would reach a point where the bleeding has stopped.

    The reason that the debt to GDP ratio increases after that is not because of faulty monetary or fiscal policy. It is because of changing demography and increasing health care costs. That is a serious problem which must be dealt with – in my view, by rationing health care. However the solution to this is not a sequester, but rather an adult discussion of how much we want to spend on health care and how to spend the money most wisely.

    Inflation will not have the impact on our current debt which you imply. The government currently pays 1.9% to borrow money for ten years. If inflation increases, the coupon will still be 1.9%. The increase in debt service cost arises only for any increased yield which investors demand to fund new debt. (The exception is TIPS, or government bonds whose interest rates are calibrated to the inflation rate. These currently pay a negative real interest – i.e., people pay the government for the privilege of owning the bonds).

    I don’t suggest that it is hunky dory that we have a sixteen trillion dollar debt. I would prefer that we never launched two unpaid wars, started Medicare Part D, slashed marginal tax rates, or crashed the economy in 2008. However, how we got here is less important than what we do about it.

    In my view, the deficit is not our most pressing problem. High unemployment, an economy not running at full capacity, and global warming are more pressing concerns. There are two choices: using austerity to reduce government spending (which will increase unemployment, stall the economy, and – according to Ben Bernancke yesterday – do nothing about the deficit) or stimulate the economy with (decreasing) deficits to grow out of them.

    Future generations do not have to pay off all of the debt. We’ve had a national debt since Alexander Hamilton was Secretary of the Treasury. Our obligation to our grandchildren (when we get them) is that the debt they inherit is manageable. This is a function both of the level of debt and how robust the economy is to support it. You could argue that increasing debt loads is eating our seed corn, but you could also argue that neglecting our infrastructure, skimping on education, and tolerating degradation of the environment is eating our seed corn. It is a balancing act to determine when to shift from fiscal and monetary stimulus to more restrictive policies, but I’ll concur with Ben Bernancke. We’re not there yet.

    Posted February 27, 2013 at 7:29 pm | Permalink
  10. Malcolm says

    If the debt to GDP ratio reaches 2.4% by 2015, then it will have stabilized.

    If something is about to increase sharply, then it hasn’t “stabilized”. (You also mean the deficit-to-GDP ratio, not debt.)

    Inflation will not have the impact on our current debt which you imply. The government currently pays 1.9% to borrow money for ten years. If inflation increases, the coupon will still be 1.9%. The increase in debt service cost arises only for any increased yield which investors demand to fund new debt.

    But there will of course be plenty of “new debt”. In addition to the unavoidable crises you mention — demographic collapse and rising healthcare costs — one of the factors the CBO cites as a cause of the increasing deficit after 2015 is “growing interest payments on federal debt.” And as our debt works its way up and up, we’ll need to pay a higher and higher premium to cover more and more of it.

    In later years, however, projected deficits rise steadily, reaching almost 4 percent of GDP in 2023. For the 2014–2023 period, deficits in CBO’s baseline projections total $7.0 trillion. With such deficits, federal debt would remain above 73 percent of GDP—far higher than the 39 percent average seen over the past four decades. (As recently as the end of 2007, federal debt equaled just 36 percent of GDP.) Moreover, debt would be increasing relative to the size of the economy in the second half of the decade.

    Posted February 27, 2013 at 8:08 pm | Permalink
  11. Malcolm says

    I don’t suggest that it is hunky dory that we have a sixteen trillion dollar debt.

    Well, that’s a start.

    However, how we got here is less important than what we do about it.

    One thing that usually comes to mind when grappling with ruinous debt is to stop increasing it. One traditional, and responsible, approach is to make some effort to reduce expenditures, so as to live within one’s means. (Awfully quaint for this day and age, I know.)

    Or, as seems to be the plan, we can just carry on bingeing, and placating ourselves with nonsense about how it will all be OK if we just don’t worry so much about it — after all, haven’t we a “right” to all the goodies we want? — until the whole rotten structure collapses.

    Because, you know… hey look! Global warming! Let’s impose some new regulations. That’ll get things humming right along.

    Posted February 27, 2013 at 8:17 pm | Permalink
  12. Malcolm says

    Forgive me for my snarky tone. It’s just this war and that lying son of a bitch Johnson and…

    Our historical levels of debt as a percentage of GDP:

     

    This is not just business as usual.

    Posted February 27, 2013 at 11:16 pm | Permalink
  13. the one eyed man says

    If the deficit-to-GDP ratio reaches 2.4%, then the debt-to-GDP ratio will stabilize.

    In my view, the way to avoid increases in debt service cost is to sell national assets. We have both a balance sheet problem (too much debt) and a cash flow problem (a big operating deficit). The government has plenty of assets which can be sold: gold, land, oil, buildings, drilling rights, spectrum rights, and so forth. The government should do what any rational business would do: sell off non-core assets to fortify the balance sheet.

    The debt-to-GDP ratio, at around 70%, is high on an absolute basis, but not a relative basis. It is much higher among other developed nations (e.g., Germany is around 80%, Japan is 110%, etc.)

    While “one thing that usually comes to mind when grappling with ruinous debt is to stop increasing it,” another thing which usually comes to mind is to increases taxes to the level where they pay for national expenses. Taxes are at historic lows for most income classes, and there are loopholes a-plenty for both individuals and corporations which can be eliminated without systemic harm.

    If we, as a society, want to have a safety net so the ill receive health care and seniors aren’t forced to live on Alpo – as well as maintain a military which costs as much as all other militaries combined – then we should tax ourselves at a level commensurate with our expenses. There are things which can be cut – I’m at a loss to explain why we are protecting Germany and France at levels suggesting that Stalin will come back from the grave – and there are loopholes which can be closed. The deficit is a manageable problem, but remains unsolved because the political leadership is dysfunctional and irrational.

    Posted March 1, 2013 at 1:25 pm | Permalink
  14. Malcolm says

    We do have some points of agreement here. We also have a fundamentally opposite way of looking at how a government should form a budget.

    Regarding the latter, your approach seems to be to get all the things we want, and then figure out how to pay for them. I think that’s backwards; like any responsible household (or, as you say, “rational business”) would do, I think we should first figure out how much we want to spend, and then see what that will buy.

    As for debt-to-GDP, Germany and Japan are both in trouble, and our current ratio is not going to stay where it is for much longer.

    Here’s where we agree: we could certainly change the tax code to eliminate a lot of loopholes, and to simplify it in general. It would also be good to flatten it, so that more people have some skin in the game — lest we end up like this.

    I agree also that we could greatly reduce our military expenses by not maintaining bases around the world at enormous expense. You mentioned Germany; one of the reasons the European socialist nations haven’t already completely cratered is that we have for decades shouldered all of the security expenses they would normally have had to bear on their own. It’s insane for us to be doing this any longer; we simply can’t afford it, and we could save vast sums by putting our own interests first. We live on a resource-rich continent defended by vast oceans, and our military posture should begin to reflect that.

    Perhaps in light of the catastrophic effects of the sequester we might re-think giving fighter jets to the Muslim Brotherhood? Why are we borrowing from China to lay out vast sums in foreign aid?

    I’ll go much further than you, though: because I think the appropriate role of the Federal sovereign is far smaller than you do, I think there are entire departments of the Federal government, only recently added, that could be eliminated altogether.

    Posted March 1, 2013 at 2:06 pm | Permalink
  15. the one eyed man says

    I don’t disagree with figuring out how big the pie is before allocating resources. The important thing is that there is a match between the things we want and the things we are willing to pay for.

    As for a responsible corporation or family – although analogies with government are invariably inapt – a company will often to into debt to build new factories, just as a family will go into debt to send their kids to college or recover after Sandy has flooded the basement and the Tilt-a-Whirl down on the South beach drag.

    I don’t disagree with the rest of your post either. My point is that the debt can be managed, and is not on a hopeless trajectory to a permanently parlous polity. Deficit hysterics tend to look at the past few years and extrapolate them into infinity. When you’re in the car, do you drive looking through the rear view mirror or the windshield?

    Posted March 1, 2013 at 4:20 pm | Permalink
  16. “I think there are entire departments of the Federal government, only recently added, that could be eliminated altogether.”

    Combine Justice and Treasury into a new Department of the Interior, and combine State and Defense into a new Department of the Exterior. Get rid of the rest of the useless bitches.

    If that is perceived to be too drastic, establish a third Department and call it the Department of Et Cetera.

    Obama won’t feel a thing anyway, since his Cabinet is just a decoy for his Czars.

    That ought to free up a few bucks.

    Posted March 1, 2013 at 7:30 pm | Permalink
  17. Malcolm says

    When I’m in the car, I don’t go so fast I can’t see the road ahead. And I make sure I have enough gas to get where I’m going.

    Posted March 1, 2013 at 10:32 pm | Permalink
  18. If you don’t like Department of Et Cetera, how about Department of Posterior?

    Hence, Departments of Interior, Exterior, and Posterior. Has a nice ring to it.

    Think of the potential nicknames: SecInney Holder (the twat); SecOutey Kerry (the dickhead); SecAhole Hagel (the a-hole).

    Throw in Veep BFD Biden, you get Eeny (Inney), Meeny (Outey), Miny (Ahole), and Moe (Schmoe).

    Posted March 1, 2013 at 10:56 pm | Permalink
  19. Up2L8 says

    Hence, Departments of Interior, Exterior, and Posterior. Has a nice ring to it.

    Sounds good, Big Henry. Allow myself to make a minor re-arrangement of Departments. Departments of Posterior, Interior and Exterior= P.I.E. Letting them fight over which gets the bigger piece.

    Posted March 1, 2013 at 11:29 pm | Permalink
  20. PIE it is, then …

    Posted March 2, 2013 at 2:03 am | Permalink

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