The fiscal problem

By Scott A. Robinson, Editor

Filed Under Congress, Domestic Policy on Mar 4 

Let’s have a discussion based on data and reality rather than economic theories. I have my theories, you have yours, and we probably all believe in portions of the theories of many economists, though it is nearly impossible to see many economic theories in pure practice due to all the external factors at play.

Since taking power, the party and administration of no personal responsibility has continually blamed the Bush administration while doing nothing to fix the real fiscal problems because (okay, one economics theory reference) “in the long run we’re all dead anyway” or whatever their reasons are. However, do not get me wrong here this is not a pro-Republican, anti-Democrat post, it is a “the problem with the federal government” post.

For purposes of simplicity, we’ll use data since 1980, though federal deficits have grown continually since 1970, with the exception of the Clinton years, who at least did bring us some fiscal sanity (the lack of which was probably Reagan’s greatest shortfall).

Since 2005 tax receipts have never been higher. Though there is some year to year variance, the fact is the federal government has never received as much annual tax revenue in any single year as it has each year since 2005. Meanwhile, since 2002, the deficit has increased annually. Therefore, Bush ran continual deficits that have been continued by the Obama administration, despite both have annual tax receipts higher than any other President in history. However, rather than balancing the budget with two years of a Democrat-controlled congress, President Obama only exaggerated the problem. With nearly the same annual revenues as in 2005 (revenues in trillions: 2005: $2.154, 2009: 2.105, 2010: 2.163) when federal expenditures were $2.472 trillion, the Obama budget led to federal expenditures of $3.518 trillion in 2009 and $3.456 trillion in 2010, or 42% and 40% more than in 2005 (source: The White House Office of Management and Budget, Table 1.1—Summary of Receipts, Outlays, and Surpluses or Deficits (-): 1789–2016).

DeficitsNow this does not mean Bush was a patron saint either. Although he had significantly higher revenues from 2006-2008, he continued to run a budget deficit. Additionally, as I said before, Reagan was not exactly fiscally responsible, rather Clinton set a better example (how often are you going to say that?).

However, if the past two years did not concern you, what is coming most definitely should. Again, per the White House Office of Management and Budget:

This government is drunk with spending which will destroy our country’s future. In your personal finances, if since 2002 you had spent between 6%-40% more than your income and put the rest on a credit card, where would you be? Would you keep spending money? This is the current state of our country. We cannot “spend money to keep from going bankrupt”, as Vice President Biden has proclaimed. However, every President’s actions for the past several decades have also espoused this nonsensical concept. Presidents from both parties are most definitely to blame, even the Republican’s sacred cow Ronald Reagan.

The time has come in this country to cut spending dramatically. We have already begun to see the effects of printing more and more money to cover these deficits. A prime example is the price of gasoline. Crude oil prices are pegged to the dollar. As the dollar is devalued by increasing supply, our dollars buy less.

The leaders of this country must have courage to take unpopular stances, because they are the right thing to do, much like Governors Walker and Christie. Social Security, Defense, and all federal handout programs cannot be protected. Salaries and benefits must be cut, as they have been overall in the private sector.

If we do not change, food may be the only currency of value left in this country.

By the way, this post was only about deficits. We didn’t even get into the national debt, which is even a bigger problem.

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  • Edgar

    Just a friendly correction, you called Reagan a scared cow in your post. Other than that I actually really like this post. I think the state of the deficit is one area where you and I can agree. It’s a complete mess, and if it isn’t dealt with soon we’ll be the ones running to the IMF begging for some help. I think both you and I agree that spending is a huge problem; although you should probably mention that the vast majority of the spending going on right now is for fulfilling existing government obligations. Obama may not shy away from government spending, but the vast majority of entitlements that the government is obligated to pay did not start under the Obama Administration. Since we find ourselves in a situation with very high unemployment those costs naturally sky rocket.

    Personally I think we find ourselves in a very sticky situation. The economy is not in good shape, and as you mentioned on Facebook if we were to simply pull the cord on entitlements the economy would almost certainly find itself in a free fall again. If the national debt weren’t as high as it is I would actually be alright with continuing to run a deficit. Unfortunately we ran up an incredibly high deficit during the good times, and that threatens our ability to run a deficit during these difficult times.

    This is the main reason why I don’t completely blame the Obama Administration for our existing circumstances, but I do think the Obama Administration is continuing to perpetuate the problem. I’m glad you provided some history in this post, because like most problems facing this country this problem cannot be completely ascribed to a single person or Administration. We’ve taken decades to get into this mess, and it will take a long time to get out. That being said I completely agree with you that we must do something about our current situation, no matter who is to blame.

    I suppose the question we have to ask ourselves is this: do the benefits of continuing economic stimulus outweigh the costs of amassing huge deficits? Like I said if the national debt wasn’t as bad as it is, I would be inclined to say: continue with the stimulus. As it stands today we can no longer afford to stimulate the economy. I also suspect that a huge national debt could actually overcome any short term benefits from stimulus, because a large national debt could potentially increase the cost of borrowing money in the private sector. I think it’s time to wind down the stimulus and start focusing on fiscal responsibility.

    Honestly I don’t know what the best approach would be for winding down the stimulus. I think if we moved onto full austerity measures right away we would find ourselves in another recession. I think the goal should be to roll back government stimulus at a rate at which the economy does not double dip, easier said than done.

    Here’s what I think the long term approach should be. First off I agree with you on spending, it has to be reduced. I noticed you mentioned both entitlements and military spending on Facebook. I also think those are areas that must be cut.

    During his farewell address Eisenhower warned us about the Military Industrial Complex. Eisenhower could not have been more prophetic. It pains me when I hear Republicans demanding that we build a Jet or an Aircraft carrier we don’t need because it creates jobs. This is exactly the wrong reason to build a weapon. We should build weapons with the intent to defend our country from attack. I think if we focused on building the weapons the military needs; instead of building the weapons that are beneficial to the bottom lines of weapons manufacturers, we could dramatically decrease military spending and still be able to defend our nation from attack.

    Entitlements take up a huge portion of the national budget, and for this reason they’re an obvious target when trying to slash the budget. I won’t lie though. I don’t know enough about entitlements to really be able to suggest exactly what should be cut. I suspect that some entitlements are completely wasted, and therefore those areas should be cut first. I also suspect there is less waste than many people perceive. In those instances we need to make the hard decisions and decide which entitlements stay, and which entitlements get cut.

    Where you and I will most likely disagree is taxes. You did mention that tax revenues have certainly grown, but as the nation grows the cost of running the nation will also continue to increase. Our tax receipts may be at an all time high, but so is our population. At any rate the only time the budget has been balanced in the last 30 years was under Clinton, and he accomplished this task in part by raising taxes. I’m afraid the national debt has reached a level that it cannot be dealt with without raising taxes. We’re all going to need to pitch in, in order to dig ourselves out of this mess, and part of that means paying more in taxes. Obama’s budget commission released some very interesting suggestions on how to restructure the tax code for the purposes of reducing the deficit. I think these proposals deserve a hard look.

    Another area where we may disagree is what shouldn’t be cut. There are some items of government spending that I don’t think should be cut, because they create the foundation for a stronger economy. In these instances government spending behaves more like an investment than just reckless spending. Infrastructure is an area where I think we should actually consider increasing government spending, because infrastructure provides huge economic opportunities. A good example is the interstate freeway system. Take a look at the number of trucks driving down your local freeway and consider the economic impact this has. The freeway system provides our economy with an inexpensive means of transporting goods. The freeway system is also a piece of infrastructure that is so huge it could only be accomplished by harnessing the resources of the federal government. We’re going to need more infrastructure projects like the interstate freeway system in order to support a growing economy. I’ve mentioned several times before that government can play a beneficial role in the economy. This is what I’m referring to.

    I also think we need to continue to spend on education. We’ve talked about this before, and we both agree that the problems facing our education system go beyond simple spending, but I’m not exactly anxious to see any resources taken away from eduction. We’re going to need to make major improvements to our education system if we want to be competitive in the 21st century.

    At any rate it’s nice to find myself agreeing with you on something for a change.

  • Whodat

    WE allowed our leaders to make too many promises to too many people, and those people had babies and we promised them too, then those babies have had…. We have up to 5 generations who think their public assistance IS their job. And, WE are powerless to stop it.

    WE have allowed the teachers and educrats convince us that the only success in life is that which comes from a college education. As a result, we have unemployed PhDs while a plumber costs us a fortune.

    WE have allowed drugs and guns and thugs in our schools and WE have allowed our government to open our borders, not only to those who can walk or swim in, but those who fly in on “student visas” – and WE subsidize them.

    I could go on and on, but the point is this: Our economy is tanking and WE allowed it by bits and pieces and complacency. Now the socialist-in-chief cares not because the coming chaos will serve those who want to tear us down and take over.

    WE are the answer. Question is, will enough of WE get off our backside to make a difference, or will we stay on our couch and watch our nation crumble on our 50 inch flat screen in HD?

    Me thinks there will be trials and tribulations unlike anything we have ever seen and long before the Book of Revelations opens in its full glory.

  • Brian H

    Great Post!!! Great information!!

    If Americans are not ready to bite the bullet at all levels with all programs than we will accept the consequences. What SHOCKS me as that my liberal friends I talk to do not see this train wreck as any potential problem.

  • Troy La Mana

    Better start planting your own crops and get that horse while your at it. Pretty soon you won’t be able to afford to buy fuel or food.

  • East of Eden

    Great post Scott.