How Big Is Our Debt? Do We Really Have A Spending Problem?

Yes, I know our debt $14.580 trillion as I write this, but how big is that?

No, I’m not going to do some cutesy pictures. I’m going to do some math. Scary math, but simple. Even a Democrat Senator could understand it.

The entire tax revenue in the history of the United States through fiscal year 2010 is $49.531 trillion. Tax revenue so far this year is $2.201 trillion. Simple addition gives me the number $51.732 trillion. That’s it. That’s the sum of the entire tax revenue in the history of the United States. For the rest of this post I’m going to call that ETR to avoid repeating myself endlessly.

$51.732 trillion.

Our debt is $14.580 trillion.

14.580 / 51.732 = .2818.

Our debt is 28.18% of ETR.

This year we will spend $3.7 trillion.

3.7 / 51.732 = .0715

We will spend 7.15% of ETR this year. That’s about 1/14th of the total. 1/14. In one year.

When the Democrats took control of Congress in 2007, our combined tax revenues were $42.740 trillion. Since then, the Democrats have managed to spend $13.563 trillion.

13.563 / 42.740 = .3173

In the last four years, the Democrats have spent 31.73% of the entire amount of revenue we’d collected before their spending binge.

I can be nicer and include revenue up until now, but it doesn’t get much better.

13.563 / 51.732 = .2622

In the last four years, the Democrats have spent 26.22% of ETR.

You think I should only include President Barack Obama’s (D-USA) numbers? Ok.

Outlays for FY 2010 and 2011 (generously giving 2009 to President George W. Bush (R-USA), even though budget wasn’t passed until after he left office) total $7.063 trillion. Total revenue before FY 2010 = $47.369 trillion.

7.063 / 47.369 = .1491

Obama has spent 14.91% of the entire revenues preceding him.

7.063 / 51.732 = .1365

Obama has spent 13.65% of ETR. About 1/7th of ETR. In two years.

If you’ve forgotten since the beginning of this post, ETR means “entire tax revenue in the history of the United States”. Now go back and reread the statement above.

In fairness, so we can see how much it’s grown, if I go back to FY 2007, I get the following: $42.740 trillion gross receipts & total debt of $9.008 trillion.

9.008 / 42.740 = .2108

Before the Democrats took over, our debt was 21.08% of the ETR at the time. That’s bad. No denying it. But, in four years, it has grown from 21.08% to 28.18%. This is why S&P downgraded us. That kind of growth is obscene.

America has a spending problem. Anyone who says otherwise falls into one of four categories. 1) They’re lying, 2) they’re not in possession of the facts, 3) they’re incapable of understanding basic arithmetic, or 4) they’ve lost their minds.

It’s one of those four. There are no other options.

August 6, 2001

Insider trading based on advanced knowledge of the 9/11 attacks may have begun on this date, if not earlier. Investigators later discover a large number of put option purchases (a speculation that the stock will go down) that expire on September 30 at the Chicago Board Options Exchange are bought on this date. If exercised, these options would have led to large profits. One analyst later says, “From what I’m hearing, it’s more than coincidence.”

August 6, 1945

An American B-29, the Enola Gay, drops the atomic bomb known as “Little Boy” on Hiroshima, Japan.

Before	After

 

War is Hell.

According to the U.S. Department of Energy the immediate effects of the blast killed approximately 70,000 people in Hiroshima.^[44] Estimates of total deaths by the end of 1945 from burns, radiation and related disease, the effects of which were aggravated by lack of medical resources, range from 90,000 to 166,000.^[1][45] Some estimates state up to 200,000 had died by 1950, due to cancer and other long-term effects.^[3][6][46] Another study states that from 1950 to 2000, 46% of leukemia deaths and 11% of solid cancer deaths among bomb survivors were due to radiation from the bombs, the statistical excess being estimated to 94 leukemia and 848 solid cancers.^[47] At least eleven known prisoners of war died from the bombing.

Can We Please Stop Calling It ‘Austerity’?

I’m sick of people using the word “austerity” regarding the GOP budget plans and the recent debt deal. Even Nate Silver (www.fivethirtyeight.com) used it recently, and he’s a numbers guy. He should know better.

From Webster:

Definition of AUSTERITY

1: the quality or state of being austere

2a : an austere act, manner, or attitude
 b : an ascetic practice

3: enforced or extreme economy

Obviously it’s definition 3 that applies to our budgeting. I suppose “enforced” qualifies, but I’m pretty sure that liberals are implying “extreme”. That’s certainly what I hear in my head when someone says “austerity” to me, and I am pretty sure I’m similar to the average Joe in this regard. In fact, since liberals also use the word “extreme” when describing GOP budgetary plans, I’m certain that this is their intention.

Is the debt ceiling deal really so extreme?

Based upon the January 2011 baseline from the CBO, our government will spend just a bit over $46 trillion through 2021. The debt ceiling deal reduces that spending by about $1 trillion, or about 2.2%. Our total deficit spending in that same time frame is right at $7 trillion. That means that we will be spending about 118% of our revenue over that time frame. I’ve mentioned this before, but these are extremely optimistic projections (revenues at 20%+ of GDP starting in 2015, +2.6% average GDP growth). We’re currently spending about 140% of our revenue, and honestly I don’t see any reason to believe at this point that number is going to shrink significantly over the next ten years.

However, assuming the 118% number is correct, then we’d lower spending to 115% of revenue. So, if I tell my accountant that for every $1 I take in, I’m going to spend $1.18, but then I rework my budget and realize I can get it down to $1.15, do you think my accountant is going to call that “austere” or “extreme”? No, me neither.

And it becomes even less extreme if you don’t adopt the CBO’s rosy projections. If we actually spend 130% of revenue, then this debt deal will only cut it to about 127-128%. Yippee.

How about the Ryan plan? It reduces spending by $5.8 trillion through 2012, or about 12.6%. However, it also only drops that 118% down to 115%. That’s because the Ryan plan assumes much less revenue, almost $5 trillion less, due to somewhat more realistic assumptions about economic growth (but I think the Ryan plan is too optimistic also).

In fact, the only plan that has been presented that may deserve the austerity tag is Cut, Cap, & Balance. I don’t believe that CCB has ever been scored by the CBO, but I can do some guessing based upon the January CBO data. I assumed the same optimistic GDP and revenue numbers as given in the CBO baseline, and used the spending caps as defined in the bill. It appears to cut spending by $6 trillion, much like the Ryan plan. The number works out to be about 13.1% reduction in spending. However, it does reduce spending over the next decade to a mere 102% of revenue, increasing the debt by about $1 trillion. That is significantly less than the 118%. I’m still not sure I’d tag it as extreme, though, since we still spend more than we’re bringing in. That’s in total, I should point out. CCB starts running an annual surplus in 2017, assuming the CBO’s optimistic revenue projections. My guess is that if the CBO scored CCB they’d reduce the GDP growth and revenue projections, which might make things worse.

I can’t point this out too many times. Liberals win when they define the argument. When they call these plans austerity measures and we let them, we lose the argument before it ever begins. The only plan above that might deserve that tag is CCB, and I personally wouldn’t even call it austere. Even CCB would increase our current debt from $14.5 trillion to $15.5 trillion at a minimum over the next ten years.

August 5, 1981

You’re fired.

President Ronald Reagan (R-USA) fires 11,345 striking air traffic controllers. PATCO had endorsed Reagan in the 1980 Presidential campaign, a decision I’m sure that they later regretted.

Alan Greenspan later commented:

Perhaps the most important, and then highly controversial, domestic initiative was the firing of the air traffic controllers in August 1981. The President invoked the law that striking government employees forfeit their jobs, an action that unsettled those who cynically believed no President would ever uphold that law. President Reagan prevailed, as you know, but far more importantly his action gave weight to the legal right of private employers, previously not fully exercised, to use their own discretion to both hire and discharge workers.

August 5, 1861

The Revenue Act of 1861 is enacted, levying the first income tax in the United States.

Rates under the Act were 3% on income above $800 (adjusted for inflation: $18,875 in as of 2009 dollars [2]) and 5% on income of individuals living outside the country.

The Revenue Act of 1861 was signed into law by Abraham Lincoln, the first Republican President. This Act introduced Federal income tax as a flat rate tax.

The income tax provision (Sections 49, 50 and 51) was repealed by the Revenue Act of 1862. (See Sec.89, which replaced the flat rate with a progressive scale of 3% on annual incomes beyond $600 ($12,742 in 2009 dollars) and 5% on incomes above $10,000 ($212,369 in 2009 dollars) or those living outside the U.S., and perhaps more significantly it was explicitly temporary, specifying termination of income tax in "the year eighteen hundred and sixty-six").

This tax was later completely repealed, but re-enacted during World War I. The burden on taxpayers has been increasing almost continuously ever since.

July Unemployment Report-Not Decent. Not Bad. AWFUL

By now you’ve probably heard the news on this month’s unemployment report from the Bureau of Labor Statistics (BLS). At first blush, it sounded decent, but not good: 117,000 jobs added, unemployment down 0.1% to 9.1%. And that’s how I called it on Twitter.

If you listen to Rush or to Jim Pethokoukis, you know a bit more of the truth. Labor force participation rate is down to 63.9%. Employment-population ratio is down to 58.1%. 193,000 people left the workforce in July. And if the active labor force was even as big as it was when President Barack Obama (D-USA) took office, the unemployment rate would be 11.7%. That’s bad. And that’s how the market is reacting.

The truth? It’s worse than that. Much worse.

Between May and July, the number of employed Americans shrank by 483,000. To put that in perspective, since last July, the number of employed Americans only grew by 400,000. In the last two months, we have erased over half the gains of the entire last year. If we have another two more months like this, we’ll erase the entire gains of the last year.

If that sounds like the economy is improving to you, then you’re delirious.

And that doesn’t even take into account the amount the labor force should be growing every month just due to the birth/death rate in the United States. We need to hire 125,000 people every month (about what we did last month) just to keep pace, and to keep the unemployment level at about the same. In other words, a gain of 125,000 jobs represents a net gain of 0.

Adding in that little tidbit of information, and now instead of being down 483,000 jobs the last two months, we’re down 733,000 (net). Instead of being up 400,000 since last July, we’re down 1,225,000 (net).

You can try to spin this positively, and I’m sure the White House and our compliant media will, but these numbers are awful.

As I said on Twitter, if a cancer patient was recovering like this economy, the doctor would be talking with the family by now about “preparing for the future”. That’s how bad these numbers are.

August 4, 1977

The Department of Energy is created when President Jimmy Carter (D-USA) signs the Department of Energy Organization Act.

The reasons given for this:

Sec. 101. The Congress of the United States finds that—
(1) the United States faces an increasing shortage of nonrenewable
energy resources;
(2) this energy shortage and our increasing dependence on foreign
energy supplies present a serious threat to the national security of the
United States and to the health, safety and welfare of its citizens;
(3) a strong national energy program is needed to meet the present
and future energy needs of the Nation consistent with overall national
economic, environmental and social goals;
(4) responsibility for energy policy, regulation, and research, development
and demonstration is fragmented in many departments and agencies
and thus does not allow for the comprehensive, centralized focus
necessary for effective coordination of energy supply and conservation
programs; and
(5) formulation and implementation of a national energy program require
tie integration of major Federal energy functions into a single
department in the executive branch. (91 Stat. 567; 42 U.S.C. $71 11)

And some highlights of its defined purpose:

(2) to achieve, through the Department, effective management of energy
functions of the Federal Government, including consultation with
the heads of other Federal departments and agencies in order to encourage
them to establish and observe policies consistent with a coordinated
energy policy, and to promote maximum possible energy
conservation measures in connection with the activities within their respective
jurisdictions;
(3) to provide for a mechanism through which a coordinated national
energy policy can be formulated and implemented to deal with the
short-, mid- and long-term energy problems of the Nation; and to develop
plans and programs for dealing with domestic energy production and
import shortages;
(4) to create and implement a comprehensive energy conservation strategy
that will receive the highest priority in the national energy program;
(5) to carry out the planning, coordination, support, and management
of a balanced and comprehensive energy research and development pro
gram, including—
(A) assessing the requirements for energy research and development:
(B) developing priorities necessary to meet those requirements;
(C) undertaking programs for the optimal development of the various
forms of energy production, and conservation; and
(D) disseminating information resulting from such programs, including
disseminating information on the commercial feasibility and
use of energy from fossil, nuclear, solar, geothermal, and other energy
technologies;

[…]
(9) to promote the interests of consumers through the provision of an
adequate and reliable supply of energy at the lowest reasonable cost;

If those are the defined reasons and purposes, I think we can all agree that the Department of Energy has been a dismal failure.

August 3, 1492

“In 1492, Columbus sailed the ocean blue.”

Cristoforo Columbo leaves Palos de la Frontera in attempt to reach the Indies by sailing across the western ocean (the Atlantic).

On the evening of 3 August 1492, Columbus departed from Palos de la Frontera with three ships; one larger carrack, Santa María, nicknamed Gallega (the Galician), and two smaller caravels, Pinta (the Painted) and Santa Clara, nicknamed Niña after her owner Juan Niño of Moguer.^[35] They were property of Juan de la Cosa and the Pinzón brothers (Martín Alonso and Vicente Yáñez), but the monarchs forced the Palos inhabitants to contribute to the expedition. Columbus first sailed to the Canary Islands, which were owned by Castile, where he restocked the provisions and made repairs. On 6 September he departed San Sebastián de La Gomera for what turned out to be a five-week voyage across the ocean.

A lookout on the Pinta, Rodrigo de Triana (also known as Juan Rodriguez Bermeo), spotted land about 2 a.m. on the morning of October 12, and immediately alerted the rest of the crew with a shout. Thereupon, the captain of the Pinta, Juan Alonso Pinzón, verified the discovery and alerted Columbus by firing a lombard.^[36] Columbus later maintained that he himself had already seen a light on the land a few hours earlier, thereby claiming for himself the lifetime pension promised by Ferdinand and Isabella to the first person to sight land.

Aside: It’s amusing that we’re taught in the United States that the names of the three ships were the Nina, Pinta, & Santa Maria. Pinta was a nickname of the ship Santa Clara. But the nickname of Santa Maria was Gallega. So, in typical inconsistency we accept the nickname of one ship, but not the other.

Next Time

I’ve been giving the debt deal more thought, and I have decided there are three things that are still giving me angst. In fact, two of them frustrate me more and more each time I think of them.

Here are the three things we need to be working towards every time we get a chance:

1. Zero-based budgeting. This is vital. We keep patting ourselves on the back, saying “Hey, we finally got some cuts out of Washington. Hooray for us!” Bullhockey. We reduced the trajectory of growth. Real cuts were minimal, and perhaps non-existent. We have to get back to zero-based budgeting and get rid of this idea of baseline budgeting. That’s the only way we can change the language of the debate and make a cut be an actual cut. I think we could have gotten this on this last debt deal and it’s infuriating to me that we didn’t even try. Until we get this, it’s hard to make the case that any progress towards shrinking government is real.
2. Real matching cuts for debt limit increases. Speaker John Boehner (R-OH-08) and others on the GOP side are trumpeting that we now have the Boehner rule on debt ceiling hikes: “In the future, no debt ceiling increase will occur without a matching level of cuts”. Big effing deal. First of all, see point one about “cuts”. Second, we gave President Barack Obama (D-USA) a debt ceiling hike that will last about 20 months. The “cuts” we got are over the next 10 years. If the timeline doesn’t match, the cuts don’t match. In the future, if we raise the debt ceiling for 20 months, then the matching cuts should come from the next 20 months as well. I’m willing to give a little on this, but it has to be close. It can’t be 20 months and 120 months, which is what we got this time. I know this one is going to be hard to achieve, which is why I’m willing to compromise, a little. But this needs to be a goal.
3. Balanced budget amendment. Sure, everyone on the right is screaming about this, saying we didn’t push hard enough for it. I’ll add my voice to the chorus, but forgive me if it’s not a scream. This is a big deal, but as I said earlier in the week, it takes too long to help us turn the corner now, which is what we need to be doing. I’d rather work on 1 & 2 first, because they can have immediate impact.

Don’t mistake my frustration here as frustration with the GOP. Other than not working on #1, which I do think was a winnable issue, I don’t fault our GOP leadership. This is a war, and to win it, we need to start winning battles. Every battle should have some goals. These are the goals I want to start working on in the upcoming battles.