Tea Party Patriots Bringing the Conscience of America to Washington DC
Defaults, Terrorists and Reality
Of recent, we have heard much, of the Federal Governments’ certain default if we didn’t raise the debt ceiling, yet many fiscally conservative Congressmen made compelling arguments against doing so or at least not doing so without commensurate and immediate cuts in spending, which after all, nearly everyone admits is beyond our ability to pay for. Their reward for questioning the long-term viability and fiscal prudence of the debt ceiling deal was to be labeled “terrorists” as were the Tea Party members who supported them.
Out of this supposed crisis the President gets what he wants, authorization to spend another $2.4 Trillion and avoid debt ceiling debate till after the 2012 elections; the Republicans in Congress come out of it with no new taxes at least for the short term, and the people get to pay for the continued spending because the proposed offsetting spending cuts are mostly illusionary.
So why, all of the “theater”? What is the truth? Now that the $2.4 Trillion deal is passed do we still have reason for concern or are we out of the woods? I would like to present some facts and let you judge for yourselves.
The GDP (Gross Domestic Product or economic output) of the United States is approximately $14.8 Trillion, while the U.S. debt is approximately $14.3 Trillion and soon to rise to $16.7 Trillion. To put these numbers in context, the GDP of the entire world including the U.S. is $63.1 Trillion. Our debt will very soon exceed 25% of world GDP. But looming on the horizon, and what sends shivers down the spine of the world financial market, is our un-funded liabilities. Benefits that we owe to retirees and others that are as yet un-filed for and uncollected, and because there are no trust funds or they have been for the most part robbed, remain un-funded. The most conservative estimates place this liability at about $65 Trillion, where others place it as high as $105 Trillion. These debts are in addition to the current national debt!
Imagine one country whose debt liabilities exceed global GDP, who is borrowing 41 cents of every dollar it spends, whose currency is the reserve currency of the world and through the Federal Reserve owns nearly half of its own debt! Scary is not the word for it!
Many think that China owns most of our debt, but in reality their GDP is only about $6.1 Trillion and they hold just over $1.1 Trillion of U.S. debt, about 7% of the total and they have been reducing their stake. What they have a large stake in are the manufactured goods that we consume as we only manufacture about 10% of them ourselves.
Some think that raising taxes is the answer, but we could raise everyone’s income taxes by 50 % and would still have nearly a $1 Trillion annual deficit at current spending levels. A very real burden on all taxpayers is not a lack of taxes collected from the rich, but the governments choosing to exempt over 50% of the workers from paying federal taxes and indeed share your tax dollars with approximately 40% of the population with income tax credits, food stamps, medic-aide, housing assistance and other forms of redistribution by a government whose spending practices have outstripped the taxpayers ability to pay and still support a thriving economy as evidenced by the protracted downturn and continued high unemployment levels.
High unemployment and underemployment have along with the general economic down turn resulted in a revenue shortfall compared to 2008, of over $400 Billion annually. The uncertainty about whether spending will go down, or taxes will go, up has exacerbated the problem and slowed the recovery. One thing is for sure, raising taxes now will slow hiring, economic growth and the revenue growth that would have followed.
Clearly we have a spending problem and need to rein it in. What is not so clear is why Speaker John Boehner did not address immediate and substantial cuts in the debt ceiling deal, but opted for “pie in the sky” future cuts that he knows, full well, we cannot force on a future Congress. So in other words the very clear mandate of November 2010 has been ignored and rather than cut spending this Congress has chosen to continue spending to the tune of an additional $3.3 plus Trillion to be added to the debt. From January 2011 to January 2013, the 112th Congress will have added nearly as much to the National Debt as the infamous 111th Congress! What mandate?!
The fight with Congress and the Administration, will now be to not increase taxes and give the economy a chance to recover. But worry, from the rating agencies hinted downgrades, and the battle to avoid that, will put pressure on the Congress to either raise taxes or make additional spending cuts. So once more the taxpayer is caught between a rock and a hard place because the Congress does not have the courage to make the necessary cuts to bring financial stability, balance the budget and lower or eradicate the debt. Indeed the Congress has established a “super committee” to take up the task of determining what further cuts to make over the next decade, further abdicating their responsibility to a select few and making doubtful that the cuts to offset the new round of spending will ever truly be made.
The world financial markets have reason to be concerned when the world’s largest economy, one that is inextricably wound through their markets as the reserve currency, exhibits such irresponsibility and resorts to name calling and deception.
Some are advocating that doom and collapse are right around the corner. I would hope to think that our leaders had a better handle on the economy and that the doom was not true, but after the continuing financial crisis of the past 3 years, I am left with little faith. Just as with an overburdened family budget, we must cut the spending to match our income or risk having the debt service force us into an, ever worsening, downward spiral toward financial ruin.
Common sense dictates that there must be immediate cuts to spending in the $400 Billion or more range, cuts that include all departments even Defense and incentives employed concurrently to jumpstart employment in order to begin substantially increasing revenues. The object is to be bold, to jump out of the ditch and point the economy toward prosperity once more, not to simply tread water and await our fate as this new deal offers.
There is now reason for additional concern for the separation of powers and future of liberty as the Congress has once more, in the Budget Control Act of 2011, vested additional powers to the President, by relinquishing their constitutional power and duty to determine the need and time to spend our money and vesting it with the President.
It would seem, once more, the Congress has not failed to disappoint the people it is supposed to be serving!
Come November 2012, The Tea Party should not disappoint those who have failed us!