Is there anyone out there who can confirm or disprove the accuracy of the following video clip from a “Dr. William B. Mount“? Anyone know of any other sources for this information? If this clip is even partially true, it’s well past time for American Revolution II. And all this certainly wasn’t done by the Obama Administration in just the past two years. Not by a long shot.
Anyone?
h/t: M&G F.
This morning’s Wall Street Journal opinion page headlines the following:
Toying with Default
The President isn’t serious about real spending cuts.
Barack Obama was in full-scold mode Friday night, summoning Congressional leaders to the White House to “explain to me how it is that we are going to avoid default.” It’s a terrific question, albeit one the President refuses to answer. He remains far more interested in maneuvering to blame a default or credit downgrade on Republicans than in making himself part of any plausible solution to a crisis he insists is imminent.
I find that difficult to believe. After all, on the home page of the Office of Management and Budget, better known as the OMB, we have the following statement from the man himself:
Now, don’t you feel better? Common Sense will get the job done!
Wonder if Mr. Boehner is of the same opinion?
Ciao, Dennis
That implies, of course, a negative deficit, as one might say in gov’ment speak. For most people it makes no sense to borrow more money to pay back money and then not pay it back. But that’s what countries all over the planet have been doing in ever increasing amounts with accelerating frequency. And for the United States that approach will probably mean a higher average interest rate since our national credit rating seems likely to tank in the near future. Or does it? Not my department. I’m terrible at predictions. After watching the Beatles on the Ed Sullivan show I prognosticated they’d never be that big.
What interest rate does the U.S. pay on its debt? That’s available here at treasurydirect.gov. The rate given is a composite of those paid on various types of securities with varying maturities and rates. For June of 2011 the figure was 2.957%. Just for the heck of it we’ll use 3%.
Note that there is no mention of the aforementioned “intragovernmental” debt anywhere to be seen on this page. That’s because interest on phantom debt is ethereal and difficult to display visually. Though much ado of said numbers is often made while bureaucratically cooking the intragovernmental balance sheets.
Also note that the rates given do not include any of the inflation adjusted securities as is footnoted. So, our 3% is already an underestimate. If inflation accelerates and/or the Dollar drops more, essentially two sides of the same coin, that underestimation will increase. Oh, well, but let’s press on while retaining a smidgen of trust in the Treasury number for June.
We must also decide on a public debt total to use in our calculations. I’ll go out on a limb and extrapolate the historical increase in the public debt since the end of the last fiscal year to come up with a total for FY2011 which ends September 30th. Let’s see, that should be ((($9.742 – $9.017) x 1.33) + $9.742) = $10.706 trillion, approximately. Plug that into our simple interest debt reduction calculator using a standard repayment term of 30-years and we have: 
This result is valid if, and only if:
And still, the first year payment is $678 billion!
Obama isn’t the only one who got us to this point. The Bush tax cuts and budget deficits contributed mightily to the deficit explosion, while the American public did its part by pumping the housing bubble with speculative “Liar Loans” that were an integral part of the financial meltdown of 2008. The resulting reduction in tax revenue collections has substantially exacerbated the deficit problem.
More on that next time.
Ciao, Dennis
No, I’m not Neil Simon and this isn’t coming to you from Biloxi. Africa-hot though it be. All sane persons, that doesn’t include mad dogs and Englishmen, are either in the shade or in the water. In a way, working on America’s budget, whether at this or any other time of year, is akin to making oneself do a hundred pushups – it’s difficult, tiring, but character building. And somebody’s got to do it. Right?
Flexibility, that’s the key. At least that’s what the Associated Press contends in this report:
WASHINGTON (AP) — Senate Republicans are showing far more flexibility than their tea party-backed House colleagues as Washington policymakers seek to steer the government away from a first-ever default on its financial obligations.
[snip]
President Barack Obama also lauded the deficit-reduction plan put forward by a bipartisan “Gang of Six” Senate lawmakers, which calls for well over $1 trillion in what sponsors delicately called “additional revenue” and some critics swiftly labeled as higher taxes
That flexible bipartisan Gang of Six Senators will show those pesky Tea-Partying Representatives a thing or two! Perhaps the Gang would be better off if they learned a few things. Or, at the very least, owned up to what’s really going on in a swamp that’s better known as Washington D.C.
For example, why are we bumping up against the Debt Ceiling? The current limit is about $14.3 trillion and, as of July 19th according to the Treasury Department, U.S. debt held by the public stood at “approximately” $9,753,904,328,297.12. So what’s the problem? Oh, I forgot that mysterious class of debt known as “intragovernmental.” Currently, that’s at $4,588,994,138,771.95 which gives us a whopping total of $ 14,342,898,467,069.07, if Treasury got their arithmetic right. So that’s the problem!
But it’s all a fiction whether it’s statutorily correct or not. Intragovernmental debt represents moneys that were at one time collected, by statute, for one purpose, and then spent on something else, that is, whatever at the time happened to strike legislative fancy. Our congressional financial wizards started writing markers and continued writing them until we reached the current “gargantuan” figure, as Elle Driver would describe it:
If you think this is nonsense, you’re right. Can you loan yourself money, spend it, and still have it available for its originally intended purpose? Can the gov’ment? They only think they can. Or rather, they want you to think they can. They either have to collect more taxes, borrow more money from the “Public,” or crank up The Quantitative Easing.
The most notorious pea in this shell game is the so-called Social Security “Trust Fund.” Mr. Krauthammer did a nice job back in March of explainingthe “special issue” bonds that are the trust’s only asset:
Special they are: They are worthless. As the OMB explained, they are nothing more than “claims on the Treasury [i.e., promises] that, when redeemed [when you retire and are awaiting your check], will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.” That’s what it means to have a so-called trust fund with no “real economic assets.” When you retire, the “trust fund” will have to go to the Treasury for the money for your Social Security check.
Bottom line? The OMB again: “The existence of large trust fund balances, therefore, does not, by itself, have any impact on the government’s ability to pay benefits.” No impact: The lockbox, the balances, the little pieces of paper, amount to nothing.
Media Matters disagrees:
In his column, Charles Krauthammer called claims that Social Security is solvent until 2037 a “breathtaking fraud” and said that the Social Security trust fund consists of “little pieces of paper” that “amount to nothing.” In fact, the Social Security trust fund consists of U.S. Treasury securities that are backed by the full faith and credit of the federal government and are generally considered to be “one of the world’s safest investments.”
Well, not anymore. What about those looming downgrades by the rating agencies? Would our national credit rating be dinged because we refused to borrow more? Doesn’t one’s credit rating improve upon a reduction in the amount owed, not upon increase? Anyway, Social Security isn’t the only trust fund funded with worthless bits of paper. It’s just the largest.
There’s a whole bunch of them, including the Civil Service Retirement and Disability Fund, Military Retirement Fund, Federal Hospital Insurance Trust Fund, Federal Disability Insurance Trust Fund, et cetera, et cetera, et cetera. You can find the most recent official GAO report to the Treasury on the subject here. It’s on page 29 of the online “pdf” file. If our esteemed Congressional denizens ever fessed up to this fiction, I would be surprised if the additional post-9/11 Capitol Police regiments didn’t thereby prove a prudent forethought.
That’s all I can muster for this day. Back to my pushups. Yeah, right.
More to come.
Ciao, Dennis
Spend a little time perusing federal budget details and you’ll easily find much to prune chop out.
One item I find especially interesting is the increase in the budget for the Capitol Police since 9/11. In 2001 that totaled $120m. Today? Well, the plan for FY2012 is $397m! That’s more than three-times as much!? Though the question pops into my head, “Are our esteemed legislators concerned more about terrorist attacks or an irate citizenry revolting?” Or is that naught but a distinction without a difference – from their perspective, that is.
There’s been much in the news fairly recently regarding mustering the Childhood Obesity Police. Michelle Obama is readying herself to lead the charge against all those little fatties. But I have a better idea. Save money by putting all those cuddly, chubby kiddies on diets. That’ll reduce the Agriculture Department’s budget. After all, “Food and Nutrition Service” outlays have also more than trebled, going from $33b in 2001 to $107b scheduled for FY2012. Eat less, lose weight. Something akin to spend less, reduce debt. Straightforward concepts such as these must be above Legislator pay grades. Or are they?
I’m still working on getting my budget proposal together. No matter. They’re not holding their collective breath in Washington. Trying to figure out which funds are just going around in circles vs. real-dollars-in and real-dollars-out is not an easy task. Perhaps it’s a waste of time. After all, the day may not be that far away when there won’t be a real-dollars at all.
Meanwhile, you can figure some of it out for yourself, should you be interested, and you should be interested since it’s your money, by visiting the linked spreadsheets. You’ll then be able to impress family and friends with your budgetary acumen. Though I’ve had little success along that line myself.
Happy spelunking!
Ciao, Dennis
And how much does it actually take in?
These questions are not quite as easy to answer as one might assume. After all, “income” minus “outgo” equals “surplus/(deficit)”, right? “Eh!! Wrong answer, Hans”, as Bruce Willis quipped once-upon-a-time. And when it comes to money – or most anything else – our fearless leaders and the legions of their minions seem genetically incapable of giving unambiguous answers or presenting data in a straightforward fashion. While digging around in the federal data mines, I even came across one site that claims to be the place to come for officially-guaranteed accurate information. I guess not all federal bureaucrats can be trusted to check their outputs and postings. But why are these two questions not easy to answer?
Well, turns out that the budget spreadsheet that says “Outlays” isn’t just outlays. It also has things called “Offsets.” Offsets are negative outlays. Got that? Some, I don’t think all, are real money, such as “Undistributed Offsetting Receipts” that totaled $268b in 2010 alone and includes such items offshore-drilling royalties.
To get a handle on what the “real” outlays were, I sorted the spreadsheet I got from from the gov’ment by the line totals for the years 2001 through 2012, tossed out all those lines with naught but zeros, and split the spreadsheet to separate outlays from offsets. I could now individually resort both spreadsheets by Agency, Bureau, or whatever, to determine totals and subtotals by the category of my choosing. Viola! Now we’re getting somewhere.
To ensure that I hadn’t made an egregious error during the course of these gymnastics, I checked my spreadsheet totals against the summary information directly posted by the Feds. This exercise, along with the federal debt levels for the years 2001 through 2010, are shown in the following spreadsheet, which you can view directly by clicking on the link:
Expenditures & Debt (updated & corrected 2011.07.22)
So, I’m confidant that I now have the numbers correctly sorted and separated for your convenient viewing and study. Getting this done, after inconveniently confusing myself, was necessary before proceeding to the next step of comparing and analyzing the absolute and relative levels of expenditures since FY 2001. Hence the delay in getting this post up describing my massaging of the budget spreadsheets.
More later.
Ciao, Dennis
New and improved spreadsheets now posted.
* * *
Upon further study and additional time spent improving my budget erudition, I’ve discovered that the “expenditure” spreadsheet referenced below is seriously in error. It greatly understates the level of federal spending. When I am confidant that I’ve got it right, the corrected information will be posted. Sorry ’bout that.
— The Management.
As Matthew Continetti of the Weekly Standard confesses:
The debt ceiling debate is maddening. I feel as though I’m living in Bizarro world, where an argument over which programs to cut suddenly morphs into a discussion over which taxes to raise.
I made the mistake of watching President Obama’s press conference on Monday, and came away thinking that he doesn’t believe America has a spending problem. Again and again, he mentioned programs he wants to fund, initiatives he’d like to pursue. He has no real interest in restructuring Medicare or Medicaid to put those programs on a sound footing. He’s interested in reelection. The only sacred cow he wants to kill is the tradition of Republican opposition to tax increases.
Last night I made the mistake of watching ABC World News with Diane Sawyer wherein she graciously but breathlessly warns us of the looming debt ceiling and raging budget battle. Apparently, come August 3rd, the sky will fall. Obama says he cannot guarantee that Social Security, Veterans’ Benefits, and Medicaid checks will go out on that date “if we haven’t resolved this issue.” Alan Simpson, Republican Senator in a former lifetime and Co-Chair of the National Commission on Fiscal Responsibility & Reform (Deficit Commission), is disgusted by his (former?) party’s pettiness that is apparently overwhelming their patriotism:
Oh my, oh my, oh my! Bizarro indeed! But what to do?
The “Sevakis Plan”, of course!
In short, balance the budget tomorrow with $0.10 in tax increases for every $1.00 in cuts. Freeze the U.S. Debt held by the public, and unilaterally restructure it so as to pay it down to zero over a period of 50 years. No increase in the debt ceiling required. (Though I’m not sure that’s even a problem.) Plus, there’ll be no immediate cuts in Social Security or Medicare.
Balderdash! You say? Well, if you study the details of federal spending over the past decade, and look at the proposed budget for FY 2012, you begin to realize, as I did, that spending, including that for defense, has been so ridiculously inflated that cutting a trillion or so dollars out of the budget is not all that big a deal. Going back to FY 2007 levels – and that doesn’t include SS or Medicare — just about gets you there. And if you can’t run the country on about $2.4 trillion or thereabouts, we may as well give up.
The link given below will take you to to SkyDrive (That’s not “SkyNet” so not to worry!) where online, whether or not you have MS Excel, you can open a spreadsheet with the spending and budget data I’ve been discussing. If you have Excel 97-2003, you can download the file for greater functionality and speed.
Tomorrow, I’ll have more to say on the subject as well as give you the basics of how the spreadsheet was developed from the original, “official” data and its structure.
Ciao,
Dennis
