President Barack Obama, unfortunately joined by most of Washington, is completely unserious about tackling our major fiscal issues. Often repeating his call for the wealthy Americans to pay “a little more,” a recent article once again illustrated how trivial this approach is.
First of all, we generally tax based on income, not wealth, so taxing the wealthiest Americans is a false notion. That aside, it was recently revealed that the 400 wealthiest Americans have an accumulated wealth of $2.3 trillion.
While this may sound like an incredibly large sum of money, it pales in comparison to the mountain of debt that is still growing at record levels.
Let’s just say we take all of their wealth at once in a kind of tax stimulus package for the country. Assuming all of their wealth would only erase the deficit from 2010 and 2012, which weren’t even Obama’s two worst years – 2009 and 2011.
So while the richest 400 Americans are certainly doing just fine for themselves, their total wealth would barely put a dent in our debt and you would lose all of their potential wealth and job creation for the future.
Suffice it to say that the constant demonization and focus upon the rich to help solve our major fiscal issues is a red herring and does more for populist messaging than anything.
But as the fiscal year for America has just begun and we start anew in October, let’s have a fiscal health check and look at where we stand:
The 2013 deficit was nearly $680 billion. While President Obama takes every opportunity to brag about how far that has fallen, it is still, by far, the highest deficit in our history outside of his presidency. Even measured in constant dollars, it is significantly higher than any of the deficits we have ever run, even during World War II. Perhaps it’s just me, but bragging about bringing deficits down to a level that is still the highest in our history is not exactly a resume highlight.
Our revenue in 2013 hit record levels as we pulled in $2.775 trillion. Measured in constant dollars, it still falls short of the revenue from 2007, but second place is pretty good here. Spending, on the other hand, remained relatively flat at $3.454 trillion, which is very near the average for Obama’s presidency.
The current national debt, at time of writing, stands around $17.854 trillion, a huge increase from this time in 2008 when it stood at $10.718 trillion. Going back even further, say 10 years, we see an almost unrecognizable number – $7.603 trillion. As I mentioned before, we may be dropping our deficits dramatically, but the debt is still increasing at a record rate. In fact, the national debt is rising 53 percent faster now than it did from 2004 – 2008.
The share of national debt has also risen to alarming heights. If you are a citizen of the United States, your share stands at $56,000, an increase of more than $20,000 from just six years ago. If you’re a taxpayer, the news is far worse. Your share is nearing $153,000, an increase of more than $54,000 in the past six years.
Unemployment recently ticked down to 5.9 percent, due just as much to people dropping from the workforce as to jobs being created. This has been a normal trend throughout Obama’s presidency as the labor force participation rate has steadily fallen and has now reached a 36-year low of 62.7 percent. For perspective, the average participation rate during the Bush years was 66.1 percent.
Despite the claims and proclamations of a solid recovery, there are still nearly 47 million Americans on food stamps, a near 50 percent increase from 2008 and almost double the number from only 10 years ago. The number of Americans living in poverty is even higher at 47.3 million. This too is a dramatic increase of nearly 21 percent from 2008.
Even a cursory look around the economic stats does not exactly leave you with a feeling of hope and confidence. Looking at the future estimates for government revenue, spending and deficits leaves one with a feeling of dread.
The government itself is projecting an average yearly deficit of $520 billion for the next six fiscal years. Even with their rosy numbers, that would leave us with a national debt of $21 trillion by 2020. This, according to President Obama, is manageable.
This average yearly deficit, by the way, is far more than the average under Bush from 2002 – 2009 which was only $443 billion, and that was called unpatriotic by Obama.
But be warned about future estimates, because the government tends to be extremely optimistic for their reports. Looking back to prior estimates on years that have now passed, the federal government overestimated revenue by more than 14 percent and underestimated the future deficits by nearly 15 percent.
This hearty and unrealistic optimism led to $1.758 trillion less in revenue and almost $700 billion more in debt than the government expected in just a five year span.
Now that you’ve been hit with a barrage of numbers, percentages and statistics, let’s talk about a solution. The only solution I am entertaining is one that will actually do the job of balancing the budget and begin to address the repayment of our national debt.
It sounds complicated, right? It’s not.
In order to balance the budget, we must maintain control over that which can be controlled – spending. Fluctuations in revenue are to be expected, and while we can have some influence on that number, it will always remain variable. Spending, on the other hand, is entirely under our control, and should be the mechanism for achieving a sustained balanced budget.
Since 1975, the revenue of the federal government has averaged 17.3 percent of GDP, according to data from the White House itself. Spending, however, has averaged 20.5 percent of GDP. While President Obama and the majority of Democrats will say increased revenue is the key, our record revenue this year only amounted 16.7 percent of GDP, more than half a point below average.
Increased revenue is not the golden ticket to a balanced budget, decreased and controlled spending is.
With those historical averages and numbers, it seems obvious to me that unless spending is brought down to 17 percent of GDP, we will always be running massive deficits and never get a hold of our national debt.
With spending constantly pegged to 17 percent of GDP, we would put ourselves in position to actually run a surplus and not only get control over the national debt, but begin to be able to pay it back.
While the left will shriek about draconian cuts and people dying in the street, a current budget at that percentage would be $2.822 trillion, nearly the same budget we had in 2008.
Our fiscal problems are absolutely immense and not getting any better, but rather than rail against them, we must find the simple and realistic solutions that will actually do the job. The proposal above is just one of them, and while it may not be easy, it is certainly simple.
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