Budget Follies

We live in a country where the Government spends much more than it collects in taxes.  Faced with that the last congress at the urging of the administration passed a tax break primarily for businesses and the wealthy.  The deficit grew and so did the national debt.

National Debt is one of those things that is fine until the day that it isn't.  Since we run higher and higher deficits we are forced to borrow to pay the interest on it.  As it grows the interest grows and we need to borrow more.

We have actually been pretty fortunate in the fact that interest rates have been very low for an extended period of time.  The interest on the debt is dependent on the amount of the debt and the interest rate.

There is no current achievable way to eliminate the deficit.  We would need to take draconian measures to even come close.  Massive cuts in popular programs or significant tax increases would be required and no one in politics is going to do that.

The other way to reduce or possibly even eliminate the deficit would be if the economy was to grow at a rate that we aren't even close to.  achieving.

In the budget about to be proposed by the administration we see significant increases in defense and wall funding slightly offset by unacceptable reductions in domestic programs.

It includes unrealistic growth projections that make it look like we can actually reduce the deficit.  So far this year the deficit has increased 77% over the prior fiscal year as growth has slowed, our trade deficits have increased and spending is greatly outstripping revenue.

It may improve a bit as the year progresses, but the year we are talking about started in October so we are approaching the half way point.

Since the financial crisis we have seen deficit numbers that were unimaginable not too long ago, but having gotten used to them we do not treat them as a crisis.

They are much more of a national emergency than the issue on our southern border.

Spending Priorities

Watching the dontard at the G7 gives some clear signs that American leadership in most spheres is on the decline.

Unfortunately, instead of using this to help the country by reducing the amount we spend on defending other countries he is trying to increase defense spending because it is popular with some of his supporters.

I'm not advocating for a weak defense, just a smarter one that protects our country and focuses on where we need to focus.

One of the things to understand about defense spending is that it is in many ways a type of stimulus to some companies, which gets great support in congress because it creates jobs in their districts.

We build state of the art weapons that are unlikely to be used in an actual conflict.

We have military all over the globe including Korea, the middle east, Europe and Africa, to contain our enemies.

This spawns a defense industry which has been raking in record profits with no end in sight.

Instead of simply spending billions on weapons we probably don't need we should evaluate the actual threats to this country and our allies and decide on an affordable plan.

I disagree with a lot of what the dontard says and does, but it is time that our allies picked up more of the cost of defending themselves instead of us.  They are able to provide all their citizens with health care while we pay for weapons and men to protect them.

We need to focus our funds where they help the citizens of this country while staying strong.

We have technology now that can provide protection while reducing the risk to our people with drones and other technology.

We have to get smart about where the money we borrow gets spent.

Budget Follies

Nobody I know likes taxes, really, although I do know people who understand paying taxes is something we need to do to pay our countries bills.

It sees that a lot of people aren't aware of that so they simply want the taxes cut and the bills paid, well magically I guess.

If I sit down to discuss my household budget there is a general understanding that the amount of money coming in has to equal the money going out in most instances.

Sometimes of course you might have to borrow to pay for something big, like a house or a car so this becomes the household debt which results in monthly payments I have to make.

So my budget includes all the things I have to pay, including debt payments and things I would like to have which I don't have to buy.

At the end of the day I want these numbers to be less than the cash I bring in.

This results in a nest egg that I can use for retirement or special things.

However if I was to find out that I was going to get less cash each month, I would have to adjust, either by taking money our of that "nest egg", borrowing or reducing spending.  If I was to decide to just go ahead and spend more it would be a reckless maneuver.

The Government isn't very different, it has income, mostly taxes, it has mandatory payments, mostly what are called entitlements and debt and it has discretionary spending.

We tend to view defense spending as required spending but while veterans benefits are, defense spending is actually discretionary.  We could spend less and in fact the last time we had a budget surplus it was to some extent related to the reduction in defense spending after the cold war ended.

Now we spend more than we take in and the situation isn't likely to get better.  Some of this is driven by our aging population and the benefits we owe them and some of it goes back to the early days of the last republican administration.

When it started the country was running a surplus and two things happened.  A tax cut was passed and then the war on terror broke out and we started spending increased amounts in Iraq, Afghanistan and other hot spots.

We quickly went back to deficits and have been there ever since.  luckily for us the Fed has suppressed interest rates to make the debt a bit more affordable, but it still consumes more and more of the budget each year.

Sane people would look at this and conclude we need more revenue, or less spending.

That's what sane people would do, but our representatives have decided its time to increase defense spending, increase infrastructure spending and cut revenue, taxes.

Since that is the opposite of what sane people would do, I guess the only real conclusion we can draw is that the people doing it are insane.

This is our friendly deficit loving republican party.

Wait they are increasing usage fees at the national parks, that's the ticket.

Aging America

The Republican party pretends to be the fiscally conservative party and accuses the Democrats of being the big spenders.

The current budget and tax proposals in Washington would seem to put the lie to that claim.

The budget measure the Senate approved last night is expected to expand the deficit by $1.5 Trillion over the next ten years.

Now if a Democrat ever came up with such a proposal the attacks from "fiscal conservatives" would never end.

However since Republicans are trying to pass anything right now I don't see them taking a stand.

Will have to see what happens when the bill goes to the house and I think the whole thing is simply designed to allow the passage of tax breaks with a simple majority.

However, if they actually leave Social Security and Medicare alone and increase Defense and Infrastructure spending while cutting taxes on the wealthy, well the deficit will grow, maybe much faster than predicted.

The budget makes growth assumptions and if the growth is less, which I believe is likely the deficit will be worse.

Of course there is a possibility that the tax saving will spur the economy but our demographic picture tells us its unlikely.

We don't have enough workers in the right ages to grow very much as boomers leave the workforce.

That also the problem with Social Security and Medicare.

Younger people are needed to work, earn money and spend money for our economy to grow.

We probably should be emulating the early years of this country and allowing vast number of immigrants in to revitalize our economy.

Instead we are going down the path of an aging country getting cranky about young people and foreigners.

Republican Bacon

The one thing that can derail a congressman is failure to bring home the bacon.

There is a belief that Republicans want to reduce the budget and Democrats want to increase it.  It really isn't true, both parties just want to spend money in different ways.

In the reality of Washington, our insistence on not taxing our people enough to pay our bills leads to a deficit.

Now the majority of the deficit is caused by entitlement programs, Social Security, Medicare, and a few others.  They are the only places you could see cuts big enough to make a difference.

The rest of the budget, excluding interest on the national debt represents about 25% of the total and it is this which gets shuffled about.

The majority of this is spent on defense and neither side is looking to cut that so you are left with the dregs of the budget, such as the EPA, Arts, Science, Veterans etc, etc.

You can gut foreign aid to fund more defense but the deficit doesn't change.

Now, remember each congressman knows what federal programs operate in their districts.  Cutting one on those and eliminating jobs is never a good policy.  Shutting down the local social security office and making people drive further is simply going to cost votes.

This is why the budget is so hard to control.  Now you may think the government is wasteful, and similarly to all other human endeavors, I'm sure it is to some extent, but its not really much different than any enterprise.

When you cut a budget the inefficiency doesn't get better, it generally gets worse as work is transferred and starts over, workloads become more unmanageable and morale suffers.  Now to coin a phrase, everybody but the current president knows its pretty complex.

However, getting a budget to pass requires appeasing members who have to get re-elected.

No one is porkier than republicans so it should be fun to watch.