The Budget for Dummys

First, before we go any further – I’m Back. Deal with it.

Overview -

Everyone wants to talk budget today. There is a very good reason for that – our National Budget is out of control, and it is effecting the State and Local budgets. Further, given the tanked economy, it means we are getting poorer and only the truly rich are doing well. No one seems to disagree with it but at the same time, few are even close to seeing the real hammer falling. Let’s take a real simple overview of the situation.

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A balanced budget is actually a pretty simple equation – Proposed Spending + Owed payments on Debt = Revenue. This seems really simple right? Apparently not – at least for our legislators or even those that talk ad nauseum about how our spending is out of control with no real insight about the real problem.

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Everyone wants to talk about cutting our spending. Let’s cut this program or that program. Let’s repeal “Obamacare” and that will save the budget. Let’s reduce the money we spend on funding NPR and Planned Parenthood. That will surely balance the Budget.

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BULLSHIT. Yes, you read that correctly, Bullshit. That kind of thinking is tantamount to putting a band-aid on an arterial bleed. To understand why it is bullshit, you have to understand exactly what kind of money we are talking about.

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Our National Debt -

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Remember the equation I quoted above? Let’s put some figures into that equation. Every year, the US has to make payments on the debt it already has. It is no different than when you go to the bank and get a home loan. If you don’t make your payments, the bank forecloses. I guess a better analogy is credit card debt. When you can’t make your payments, you default on your debt. No one knows for sure what would happen if the US defaulted on it’s debt – it has never happened. That said, you may well see it happen in April if Congress doesn’t vote to increase the US debt ceiling, but that is a discussion for another time. Let’s just focus on the basics.

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Currently, the US Government has “borrowed” enough money to incur a hefty debt – so big a debt that the interest payments alone on that debt are almost 400 Billion dollars. Yes, you read that correctly, 400 billion dollars . Let’s put that into perspective. If the Tea party Republicans are successful in cutting 100 billion dollars from discretionary spending like they promised to do, they will have found money to pay for a little under 1/3 of our annual INTEREST payment. That doesn’t even address our principal debt payments – just the interest payments. Even if they succeed (which they probably won’t, by the way), they will have INCREASED our national debt by over 200 billion dollars.

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No one wants to talk about this. It is overwhelming for most people and I really do understand that. Unfortunately, it is the reality of the situation and we have to deal with it. If we don’t deal with it, by 2020, our debt payments will be more than the national revenue and we will be essentially bankrupt. This the real issue here and it MUST be dealt with. Unfortunately, it is not an easy thing to do and it surely won’t be politically healthy to deal with it rationally.

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Spending -

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As the Tea Party wants to point out to us, we must cut spending. If you look at the equation above – spending is part of the problem. So how do we go about cutting spending? Let me say, without any reservations at all, the current method of spending cuts being looked at by Congress is NOT the way to address the issue. Congress is using the Tea Party approach – lets cut “entitlements” and that will solve the problem. What utter stupidity.

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As the article I linked explains, the Tea Party (and everyone else in Congress) seems to think that we can balance the budget by making cuts in the 15% of the National Budget set aside for non-defense discretionary programs. This includes things like infrastructure (highways, bridges, dams, etc), “entitlements” (welfare, food stamps, federal work programs like ‘experienced works’ etc), Regulatory agencies (EPA, NRC, etc), the list goes on. Unfortunately, this spending what makes our Federal Government work. Further, there isn’t enough money in this budget to truly effect the overall problem – as I said above, it is only 15% of the Federal Budget. What doing massive cuts in the budget will do, though, is guarantee that the Tea Party will die a painful and lonely death come next election. “WHAT”, you say? Yep, you heard me right. If the Tea party does succeed in cutting 100 billion from this budget, they will be murdered in the next set of elections.

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Ask yourself this question – “What is the single largest voting block in America?” If you answered Organized labor, you would be wrong. They are large, no doubt about it. In fact, the recent Tea party attacks on Organized Labor are already taking their toll on contributions to both Republicans in general and Tea Party idiots in specific. Women Voters? Again, large but incorrect. The Single Largest organized voting block in the US is Seniors. Deal with that fact for second. What programs have the Tea Party caucus in Congress already attacked? Why the programs aimed at Seniors, the poor and women. The AARP has finally figured out that I turned 50 last year (point of fact, they started schmoozing me BEFORE I turned 50), and I get their monthly magazine. If you think they are not mad as hell right now, you are living under a rock. Believe me when I tell you that the Tea Party better duck and cover from Grandma and Grandpa come next year’s election.

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A good plain English overview of what has to be done with spending was “penned” by Jim Wright at Stonekettle Kitchen. His post is long (yes, he is even more long winded than I am) but you really need to read the whole thing. He says it much better than I can, though I will pull out some of the more important parts. I encourage you to read his blog, even though I don’t always agree with his slant on everything (he is a little more liberal than I am and we certainly do not agree on guns/gun control).

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Social Security -

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Let me say this as plainly as I can…. Social Security is not an issue with the Federal Deficit, the Federal Budget or Cutting Costs. The Hoopla associated with Social Security is a smoke screen to distract people from the real issues. Anyone that tells you otherwise is lying to you and trying to either scare you, or sell you something. The article linked above explains Social Security VERY well and you really should read it – I certainly could not have explained it better. The one issue I have with his explanation is that he does not cover the issues with SSDI (Social Security Disability Insurance). Due to states having a large say in how a person qualifies for SSDI, and the current setback in the Economy, SSDI is an issue, but that issue can easily be resolved by doing 2 things – A) Standardize the qualifications for SSDI and B) fix the economy. As Jim points out, there is more than enough money as it stands in Social Security to cover the shortfall but we do need to get people back to work so that SSDI doesn’t overwhelm Social Security.

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The Military -

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Tea Party “patriots” want to wave the American Flag and tell you – at length – how important the military is to them. They will talk your ear off about how “honorable”, “wonderful” and “special” our Military is, and to some extent, I agree with them. As a veteran, I have a great deal of sympathy for the men and women that serve this country – especially given that my son is one of them. That said, the Military is one of the biggest cash cows the Federal Government (and the contractors that leech off of it) has and it MUST be part of the push to address the budget. Even Veterans and Active Duty Military understand this. There are glaring problems with Military funding (and not in underfunding) that would jump off the page if only we didn’t treat the Military like some kind of sacred cow. Once again, I would direct you to Jim Wright’s blog, as his summary of the excesses in Military Spending come from actually still being part of that world. In my day, it was the Bradley fighting vehicle. Now it is the F-35 strike fighter. Whatever the current toy is, it is a probably a boondoggle the likes of which to make even a Kennedy slobber in anticipation of the money to be made.

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Further, we have been engaged in two VERY costly wars with no real end in sight. It used to be a War would help the economy, not so much now. In fact, these wars are quite literally bankrupting our economy, destroying our national moral, and killing our youngest and brightest. What MORON had the bright idea to get involved in a war in the Middle East anyway? They have been killing each other over religion for more than 4,000 years and there is no reason to believe they won’t be killing each other over religion for another 4,000 years.

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Now we find ourselves (in a limited capacity) involved in yet another conflict in the Middle East – and a civil war to boot. Just how crazy do you have to be to get involved in a civil war? When I was a police officer, the only call that ever made me nervous was a domestic dispute. Every other type of call had rules and you could – more often than not – deal with the situation easily in a controlled manner. Not so with a domestic dispute. You never had ANY idea what you were walking into. We answered one call and found an woman who had been stabbed by her (drunk and angry) husband. While we were wrestling this 6’4″ angry monster to the floor, the woman pulled the knife out of her shoulder and stabbed my partner to “protect her husband”. Batshit crazy, man. A civil war is no different. It is impossible to tell who is on which side, the sides (and goals) change constantly and neither side really wants you there. Stupidity – and more importantly, expensive stupidity.

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Medicare/Medicaid -

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Another big problem is Medicare/Medicaid. This is one area that is really sinking the Federal Budget. I will not go into this issue very far in this post, because I am planning a followup post on Medicaid/Medicare/Healthcare Reform. I do suggest you read what Jim wrote on the subject, though. It will play heavily in what I have to say about it.

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Revenue -

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Now we get to the part of the Budget equation NO ONE wants to talk about. Remember the equation above – Proposed Spending + Owned payments on Debt = Revenue. As I have already discussed, spending cuts simply aren’t going to get the job done – there isn’t enough money that can easily (or politically safely) be cut from the spending side of the equation to meet the debt that we have allowed ourselves to accrue. To address this, we HAVE to address Revenue – that means talking about taxes.

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Taxes are a necessary evil. You want a military to protect your country? You have to pay for it somehow and that means taxes. You want a national Highway system? Guess what, that means you have to pay taxes. There is really no way around it. The Tea Party demands that there be no new taxes – in fact, the name itself  (Taxed Enough Already) indicates that they are not willing to pay anymore taxes. They are also DEAD wrong.

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Smart Presidents understood the nature of Revenue VS Spending. Clinton understood it when he raised taxes to try to balance the budget. Even the Sainted Ronald Reagan understood it – he enacted some of the largest tax increases in decades. Think I am making it up? Check out this article and this post. Surprised? I am not, actually. I was a tax payer when Reagan was president and fully supported his tax increases because I understood the basic equation of how the Federal Budget works. Further, Reagan didn’t actually pass tax increases, he simply made it harder for people to evade paying taxes and he closed a number of tax loopholes.

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Unfortunately, recent Presidents have both increased spending and lowered taxes (or given tax cuts) – especially for the wealthy. This is disastrous for the Federal Budget. The Bush Tax cuts INCREASED our Federal Debt by over 800 Billion Dollars. Stop for a second and wrap your mind around that number. Even if the current Congress votes in the 100 billion dollars of spending cuts they promised, it would not even meet 1/8th of the debt incurred by the Bush Tax Cuts.

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The sad reality is, though, that no Politician was ever elected by promising Tax increases. We voters are stupid when it comes to actually understanding how things work and all we see is that our wallets will be lighter. Add to that the media screaming that tax increases “hurt the economy” and “stagnate growth” and “will damage the recovery” as well as other misguided and short sighted slogans, and suggesting tax increases is tantamount to political suicide. What we, as voters, have to do is cut through the political doublespeak and actually realise that, without an increase in revenue, the situation will only get worse until our economy fails completely. Ask anyone that lived through the Great Depression what that feels like (and that wasn’t an actual failure of the Federal Financial system).

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Not even Obama (who, hate him or not, is a smart guy) doesn’t seem to undestand the problem here. His proposed budget will INCREASE the deficit by over 2 trillion dollars just due to further tax cuts. This is insane.

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So the question becomes, “How do you raise revenue without hurting the economy even more”. First, it is a faulty question because not raising revenue will hurt the economy far worse than raising more revenue ever would, but let’s try to answer it anyway. The first thing we need to do is take a look at how taxation REALLY works in the US. Given the exemption, loopholes, incentives and gotchas in the present tax system, it appears that middle income people ACTUALLY pay a higher percentage of their real income than those in the higher or lower tax brackets. It certainly isn’t the way the “progressive” tax structure was designed, but it is the reality that has been made by the influence buying of the wealthy. Only a comprehensive tax restructuring will address the problem and those with money and influence will fight such a restructure tooth and nail. They have already proven that they can bring our economy to a halt simply to choosing not to hire or invest. Would you, as a Federal Legislator, take a chance on a backlash from the wealthy in an already bad economy by instituting a significant change in our tax structure – especially given that those wealthy patrons (and their corporations) pay for your re-election campaign? Obviously, few politicians are willing to bite the and that feeds them, even if it means their constituents grow poorer and poorer each year, the Federal Deficit grows rapidly toward bankruptcy and their actions are counter to the Oath they took when they took office.

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We support this nonsense too. Look at the Tea party – a group bound and determined to push our country straight into bankruptcy because they don’t have the brains to understand a simple math equation. We, as voters, have to stand up, make the hard decisions that our elected officials refuse to make, and make it understood by those self same, self-serving stuffed suits that it is time a real effort is made to fix this mess before it reaches a point that it can’t be fixed.

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Summary -

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Hopefully, you made it this far and haven’t gone completely to sleep. In a nutshell, we have to do some serious re-thinking about how we go about fixing the American Economy and Federal Budget. We can’t continue the way we are going and we certainly can’t afford to default the Federal Budget. Spending does have to be addressed – but it needs to be addressed across the ENTIRE budget, not just the small  portion being debated on in Congress right now. More importantly, we need to address our Revenue Structure and how it needs to change to meet our crushing debt before it crushes into bankruptcy.

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One Response to The Budget for Dummys

  1. Pingback: The Road Less Traveled » Blog Archive » The Budget for Dummys (Part 2)

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