Posted on 05/19/2011 6:36:16 AM PDT by frithguild
I’ve been very busy the last few days so I haven’t been able to research these numbers, but if you’ll forgive the unconfirmed ‘back of the envelope’ estimates, I have an interesting idea to put up.
There is no doubt whatsoever that federal tax revenues for next year will be more than enough to cover all of out interest payments on our federal debt. There will also be enough left afterward to cover a substantial portion of our federal operating budget for 2012. How much? I’m not sure. A number I heard in conversation yesterday was something like 72% of the operating budget.
Frankly that sounds high to me – but if it’s true, (maybe one of you guys can research this) then that means that a failure to increase the debt ceiling would amount to an immediate across the board spending cut of 28% for every portion of the federal government. It would then be up to Whitehouse to decide whether they would like to ‘risk the full faith and credit’ of the United States by defaulting on a debt payment, or live within it’s means and cope with the cuts.
Since the Democrats want to spend considerably MORE next year than they did this year, this will be presented as the end of civilization as we know it – in fact it already is. But to me a 28% cut, while dramatic, does not seem catastrophic at all. Mind you – this is a REAL cut, not a reduction in projected increases which is what they typically refer to as ‘savings’ in Washington.
So the question then is not whether the republicans are willing to risk the ‘full faith and credit’ of the US where the debt ceiling is concerned, but whether the Obama and the Democrats are willing to do so. Obama wants to reinvent America as a top down, command and control bastion of federally mandated fairness regulation. So to him a default might be just the thing to usher in a new era. But if it goes that way, there won’t be any question of who is to blame.
Like I said, these numbers may be way off. But even if it's only enough to cover 50% of the operating budget, that seems like a harsh but survivable number to me. (Maybe not for the SEIU - but certainly for the rest of us.)
And when I think of it that way, I think Republicans can starch their shorts and stand a little tougher. The base assumption that the federal government is not only entitled to a huge slice of GDP in the form of taxes today, but is also entitled an even bigger slice of future GDP in the form of annual debt increase, is just ridiculous.
Sounds good...but how do we do it?
It’s not catastrophic, but without an actual sharp reduction in benefits and payments for entitlements I can’t see it happening, and I fear the zombies would come out with pitchforks if we tried that.
“FY 2012 spending is estimated at $3.7 trillion (including $206 billion in interest payments), and tax receipts at $2.6 trillion, so we could cover about 70% absent new debt.”
Not to quibble, but if you’re guaranteeing payment of the interest, it means that you actually have only $2.394T in revenues ($2.6b. minus $206m.) to cover $3.494B in spending. That implies a 31.5% cut in the latter spending, rather than a 28% cut, to avoid the need to borrow further.
This is not a huge difference in actuality, but a lot of people might be tempted to frame it as a cut of “just over one-fourth” which sounds more “doable” than a cut of “nearly one third” etc.
I personally think Uncle Sam can and should tighten the belt by 31.5%, but I don’t know that the average American views this as feasible. Too many Americans will react to this by thinking “but what about my home mortgage deduction?” or “I don’t want federal highways full of potholes” etc.
A bill to increase the debt cieling does not pass the House. House passes a budget that includes 28% spending cuts, without a debt default.
28, 31.5, whatever. The point is that this discussion is not taking place, while a vast number of people would like to see the feds take responsibility of that magnitude.
No the discussion is not taking place and I have found that too many people think there is an easy fix such as just tax the rich, oil companies, etc. I also find people are looking at how we pay bills today. The discussion about what it will take to pay bills in 5, 10, 20, etc. years needs to take place. We are also only talking about paying the interest on the debt. No discussion about principal repayment is taking place. People just do not want to face the truth about how bad the situation is and how bad it is going to get. And on top of our US budget, job recovery and the continued crash of the real estate market are other major issues no one wants to face. Can’t fix anything if we don’t look at how ugly things really are.
Ok..
45% cut.. Now.. Use any additional money collected that does not go to what ever programs are left and interest to pay down the debt. Continue until debt is paid off then lower taxes to match what is spent.
Nope, I won’t win in November. But it’s what needs to be done to right the ss titanic.
Seems to me that the very first thing we need to do is to apply a tourniquet to slow down the bleeding until we can get to the emergency room for surgery.
Say to all Department Heads of the federal government, something along the following lines: “Okay, remember what your budgets were in fiscal year 2009? That is what your budget is now. Figure out what you need to do to stay within those numbers, or turn in your resignations and I’ll find someone who can”.
Obviously, this will not solve the problem longterm and would cause wailing and gnashing of teeth throughout the land, imo. We’ll find out in 2012 whether the people will tolerate this emergency measure and if so, further actions will follow to address the bigger problem.
If not, (eg conservatives are ousted in 2012), then there will be no hope to “fix” the problem.
Right...but I mean...how do we avoid the pitchforks and or a Dem sweep next fall from all the zombies losing their welfare checks?
I’m being serious - it has to be done but if the GOP loses next fall it’ll all be undone just as quickly.
Or, the Dave Ramsey method...another way to put it.
That may be the only way TO do it to avoid political catasrophe where libs are swept in to undo it all before we have a chance to really have anything happen.
OK, raise the debt ceiling enough to cover a cut of one-fourth what is necessary to balance the budget, or about 7.5% across the board.
I’m throwing a million ideas out against the wall, I don’t claim to know the answer, but I’d be OK with the scenario I just mentioned.
I wish, it’d solve all my money troubles ;) I got my name because I use to work for comcast.
Cutting 25 percent off a deficit of 31 percent?
Not enough to save the US. You’d need 6 percent year over year growth to get yourself out. If growth is closer to 3 percent, then your debt is increasing by 3 percent a year.
If they hit 72 percent of GDP, then it would rise in about 10 years to over 100 percent of GDP.
It depends on what your goal is? If you cut and balance the budget, growth will pay down the debt eventually, and you run year over year surpluses.
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