American Elephants

Unbelievable Numbers. Not Big Enough for Obama! by The Elephant's Child

The shutdown is political theater to cover up the bigger battle to restrain the federal government. The Obama administration is spending $3.6 trillion per year —without a budget. Government expenditures are expected to increase rapidly. The government has piled up $17 trillion in debt and something like $60 trillion more in unfunded spending promises.

The new fiscal year begins on October 1, which is why all this is going on now. Federal fiscal year 2013 just ended, and fiscal year 2014 began. In fiscal year 2013, the federal government collected about $2.813 trillion in revenuesand spent about $3,455 trillion. The difference between the two numbers —$642 trillion —is the unified budget deficit for Fiscal Year 2013.

So where did we get that $642 trillion that we didn’t have? We borrowed it. The Treasury department sold IOUs that we call Treasury bonds (technically bills, notes and bonds). Investors pay cash and in return get a promise that the Treasury will pay them back later, with interest, and on time.

The Treasury needs to borrow a lot because the deficit is big. The deficit is big because the federal government is spending a lot more than it collects in revenues. If we had a balanced budget, the Treasury wouldn’t need to borrow more money. If Congress and the president cut spending and /or raised taxes. The U.S. National Debt is, according to the U.S. Debt Clock$16,962,445,100,671 heading rapidly for $17 trillion, and up.

Everybody who sits down at the kitchen table with their checkbook and a bank statement understands the basic problem.  Government can just print more money, but that gets you inflation. It’s more complicated than that, but the constraint that prevents disaster is the “debt limit.”

The Democrat’s answer to these problems is usually to raise taxes. You will frequently hear a Democrat saying that under FDR the marginal tax rate on the rich was 94% and that worked out alright, why can’t we do that again? Republicans look at the size and overreach of the federal government and see no reason why we can’t do a bit of cutting back.

— In 1920, newly elected President Harding inherited a sharp economic downturn from his predecessor Woodrow Wilson that was almost as severe as the 1929 crash. Treasury Secretary Andrew Mellon slashed tax rates steeply. The top rate went from 73% to 24% and the bottom rate went from 4% to 0.5%. By 1922 the economy recovered and we had the” Roaring 20s.”

— In 1837, financial panic swept the country. President Martin VanBuren was determined to get government out of the way. He slashed federal spending from $37.2 million in 1837 to $24.3 million in 1840, and taxes went down as well. Some consider this the worst downturn until the Great Depression. (Everything is measured by the Great Depression). The economy came roaring back and revenues more than tripled one year into the recovery.

— When the Panic of 1893 hit, President Grover Cleveland refused to spend federal money. He vetoed a $10,000 spending measure to help farmers in Texas. His veto read” federal aid in such cases encourages the expectation of paternal care on the part of government and weakens the sturdiness of our national character.” He vetoed 299 other spending bills.  By 1895 the economy had grown beyond its earlier peak.

You know the more recent history of tax cuts, from Coolidge, Kennedy, Reagan and George W. Bush — all successful and resulting in economic boom. Please show a successful result from raising taxes or increasing spending.

The government shutdown showed that the 83% of the government that keeps running costs a staggering $250 billion a month. We simply do not know what the cost of ObamaCare is going to be, except that it will be far more than estimates. Everything about ObamaCare is a budget matter as well as a political problem. It is costing huge numbers of jobs, and the rollout is a catastrophe. Obama should have gone for the Republican offer of a one-year delay.

Treasury Secretary Jack Lew has demonstrated that he can lie as well as his boss, and is way out of his depth. Instead of outrageous charges of extortion and terrorism from the President and his aides, we need an upside. Oddly enough, it is proved to come from spending less, and budget restraint,Unbelievable Numbers rather than the Keynesian belief that the economy needs more stimulus.

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