THE USA SPENDING & DEBT PROBLEM-67

Let me cut through the fog and folderol of political partisanship in regard to the subject of this essay. First I will document the data in regard to the national debt increases during the presidential terms of the USA presidents going back to the Ronald Reagan administration. Notice I did not say the debt accumulated by each of these presidents. Although the president is not a mere bystander in regard to the national debt increase during his administration (for better or worse the masculine form of the pronoun can be exclusively used to date) he can certainly legitimately be held responsible for a large but not sole contribution in this regard. Here are the increased national debt data for the specified presidents. Even though President Clinton is credited with having budget surpluses in the last three years of his presidency, in all of his eight years as president the national debt increased. In fact, the last decrease in the national debt occurred in the 1956-57 fiscal year (when Eisenhower was president). As you can see the national debt increased more in the 8 years of the G.W. Bush administration than in the three previous administrations (20 years) and will have increased by circa $1 trillion more in the full 4 years of the Obama administration than in the 8 years of G.W. Bush. The national debt increase under these combined last five presidents accounts for about $15 ½ trillion of the total $16 ½ trillion debt. Of particular interest is that three of these presidents were Republicans and two were Democrats: Ronald Reagan $1 ¾ trillion in 8 years G.H.W. Bush $1.5 trillion in 4 years Bill Clinton $1.5 trillion in 8 years G.W. Bush $4.9 trillion in 8 years Barack Obama $5.9 trillion (est.) in 4 years Back in 1955 foreigners owned less than 5% of our national debt. Today nearly 50% of our national debt is owned by foreign governments and foreign private investors. A big chunk of this lending is from China and Japan. Even with low interest rates currently being paid on US government bonds the US government paid $230 billion in net interest in 2011. The reason the US government can pay lower interest rates than other countries is that investors still have more confidence in the $US than other currencies. There is no guarantee this will continue for long into the future unless we get our debt under control. It has been described as the USA being the largest midget. When Franklin Roosevelt was elected president in 1932, federal spending stood at 4.3% of the Gross Domestic Product (GDP); today it is almost six times that, accounting for one dollar out of every four in the overall economy. As has been stated by practically every economist extant, such explosive government growth and expense is unsustainable. Anyone can check these data, as they are readily available from official sources on the Internet. The numbers are rounded to the nearest $.1 of a trillion ($100 billion) and are calculated starting with the first year of the presidential term and are not adjusted for inflation, but are the actual dollar amounts at the time. On our current course this country is headed towards financial disaster. What does that mean? It indicates that unless corrective action is taken this country’s financial institutions and hence social structures will collapse. What is going on in some of the countries of Europe, especially Greece, will be replicated here in spades. Can this be avoided? Yes, of course, but it will take the co-operation of both Democrats and Republicans as well as the popular will of a majority of the people in this country. I don’t believe this catastrophic condition will happen. However, I do believe that the situation will get worse, perhaps much worse, before enough of the populace is alarmed to the degree that they will demand that their representatives in Congress and the White House fix this deadly serious problem. Given the big government and massive spending philosophy of most of the Democrat politicians and the still big spending, but not quite as big as the Democrats and the more reliant on the private sector philosophy of Republicans, a compromise solution as everyone must realize will not be quick or easy. Given what will certainly happen if no solution is agreed to it is not unreasonable to believe after much complaining, bloviating, and posturing eventually a meaningful compromise will be worked out. What course of action would I suggest? First, let me layout the problems as I see them. What are the biggest expenditures of the federal government? Here are the percentages in 2011 of the $3.6 trillion federal budget: Medicare & Medicaid 21%; Social Security 20.1%; Defense 19.4%; Benefits besides health 15.1%; Interest on the debt 6.4%; and Everything else 18%. It is therefore plain that since the first three items comprise 60 ½% of all government expenditures, then that is where the most meaningful reductions in expenditures can be made. Not that it is not worthwhile that the myriad other unnecessary and wasteful expenses be cut or even eliminated to have an important impact on reducing the debt, yet the large expenses are where the most dollars to be saved are to be found. Democrat politicians need to risk offending part of their constituency by reining in out-of-control welfare spending. It has grown like Topsy such that now there are some 82 means tested federal and state welfare programs (not including Social Security and Medicare which are only partially subsidized by the government) that cost almost $1 trillion annually. This country, or any country, cannot afford such massive government paid public largesse. Additionally such large-scale welfare programs have an enervating effect on the self-reliance and individual initiative of a great many people all to the detriment of what might otherwise be a more flourishing economy. Republican politicians need to take on the military hawks by significantly reducing our military budget. The USA defense budget at almost $700 billion annually (as late as 1990 the defense budget was $300 billion annually) is greater than the combined defense budgets of the next 17 largest spenders. These are China, the United Kingdom, France, Russia, Japan, Saudi Arabia, Germany, India, Italy, Brazil, South Korea, Australia, Canada, Turkey, the United Arab Emirates, Spain, and Israel. This is a ridiculous, wasteful, and completely unnecessary expense by the USA. For a more exhaustive treatment of the USA military read my blog essay THE USA MILITARY. The federal government gives up almost as much money for tax loopholes, deductions, credits, and other tax breaks as it collects in individual and corporate income taxes. That makes this area of potential increased government revenue a fertile source to consider as the Republican politicians, at least some of them, have stated they are willing to negotiate on. The Democrat politicians would be well advised, if they have the wellbeing of the country in mind, to actively engage Republicans on this aspect of financial reform rather than stubbornly insisting that income tax rates for the higher income cohort (where the most jobs are created) be the backbone of their increased revenue strategy. One Republican “talking point” is that we have a government spending problem, not a government revenue problem. There is a great deal of truth to that, yet the overriding problem is our ever burgeoning national debt (state indebtedness is also a major problem and a barrier to economic prosperity at the state level) which, if there is any hope to greatly ameliorate it, will require the co-operation of both Democrats and Republicans which will mean a two-pronged approach of reduced government spending and, at least temporarily, increased government revenues. I believe that a compromise solution to our debt problem is the only one available to us. The alternative: a failed, discredited, disgraced, and pitiful nation.