Sunday, October 29, 2006

HOW THE DEFICIT STOLE CHRISTMAS

I sat down to write a piece on society’s misplaced priorities on elections and election spending… I intended to start with the well-worn comparison of election spending vs. Halloween spending – the latter, by any estimate, far larger than the former.

I’m still going to write that piece, but another matter caught my attention…

While looking for some gee-whiz numbers on holiday spending, I ran into this from KRT Fort Wayne:

“Adults hijack Halloween goodies”

http://www.fortwayne.com/mld/newssentinel/15864168.htm

According to Brianna Bond of Capital News Service, “we” will spend around $4.96 billion on Halloween and $438.6 billion on the winter holidays this year.

That $4.96 billion almost doubles what “we” will spend on the election, but that’s another post…

And then this crossed my bow: A piece by Matt Crenson of AP, writing on the Federal deficit and detailing the efforts of a few sturdy patriots who are trying, Paul Revere style, to wake Middlesex, village, and farm to the danger it poses. The Seattle Times links story here:

“Economists warn of nation's coming fiscal meltdown, call for hard choices”

http://seattletimes.nwsource.com/html/nationworld/2003328801_deficit29.html

You can get the same story straight from AP via MyWay:

“GAO Chief Warns Economic Disaster Looms”

http://apnews.myway.com/article/20061028/D8L1OC5G0.html

Alas, I fear Middlesex, village and farm will sleep through it once more…

After all, it’s so abstract; so … Tomorrow… So maybe. Today’s economists - like our worthy GAO Chief David Walker - squinting down the trendline connecting yesterday, today, and tomorrow, can only say that IF we continue along the same trend, we are in big doo-doo. The words barely leave their lips when they are answered by a host of theorists taking alternate squints and advocating fixes…

If we just raise the GDP by a percent or two and assume thus and such theory is the magic bullet that kills inflation while promoting growth and filling the Treasury to overflowing…

We’ll throw in cold Fusion on top of that, since we’re theorizing…

It’s a lot like Global Warming… What little we can see doesn’t look good… But “we” can’t see much, and greed is stronger than those dim, dark warnings…

But the holidays and the deficit. What an interesting coincidence.

The current annual budget deficit, recently widely reported in the media as $250 billion and falling slowly, was actually $437 billion in August: The $260 billion reported, and another $177 billion borrowed from the Social Security surplus…

Oh, yea… We’re still borrowing that, aren’t we? The entire surplus in Social Security payments is automatically “invested” in T-Bills… We’ve been doing that since the ‘80’s, when Reagan, that great fiscal conservative – NOT! – conceived a new way to juice the books…

$437 billion… Or just about the same amount “we” will spend this year on the Holidays…

How could “we” balance the budget today, for this year? Just spend nothing on Christmas, and forward the money saved to the Treasury.



I know, that’s an apples and oranges argument, even if apples and oranges would be on the list of things forgone. And no, this Grinchy Atheist isn’t suggesting it. But I think it is an apt comparison in one sense:

Christmas is all about joy, celebration, giving, and giving thanks. As we rack up the bill, we should consider that joy is just what “we” are stealing from ourselves and those who follow. Joy tomorrow.

Someday, there won’t be a choice anymore, if Dave Walker is right. If he’s right, the ghost of Christmas future will reveal a day when we won’t be able to afford Christmas cheer – or any cheer. Everything we will be able to produce in that someday will go to repay the past we’re making today.

Merry Christmas, kids…




Comments:
The cause of the deficit is simple – ever increasing entitlements, especially for the elderly. Granny needs to stop looking for more free stuff from the government and start looking first at the 80% tax rate her grandkids will pay, and then look in the mirror.

I do have to point out that Regan hardly invented the idea of financing Social Security with T bills. That has been the law since the inception of the act.

Here is the link to the SSA’s site that states this:

http://www.ssa.gov/OACT/ProgData/transactions.html

Interestingly, the concept that Regan was somehow single handedly responsible for running up huge deficits, while at the same time cutting every single program under the sun persists to this day. The fact that these two things are mutually incompatible never seems to occur to anyone who subscribes to the theory.

True, Regan did spend a lot on defense, but that was badly needed. Remember, we had just come out of the Carter presidency. During that presidency we could not even mount a successful helicopter trip to rescue some hostages (Desert One). However, the increase in defense spending hardly accounts for the debt we accrued during Regan’s presidency. It also doesn’t square with the fact that any check of revenues during that period does in fact show that in constant dollars, Regan’s tax cuts led to a doubling of revenues to the government through increased economic activity by the end of his eight years.

So what led to the high deficits? Well, there were a lot of factors. One that is often overlooked was the fact that we were coming out of a period of huge inflation. This caused baseline budgeting, hardly a Regan invention, to cause rapid increases to all federal programs automatically. When inflation was brought under control, these budget increases remained, thus the huge deficits. Don’t believe me? Ask the IRS, here is the link:

http://www.ustreas.gov/education/fact-sheets/taxes/ustax.shtml
 
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