When the subject of budgeting and government financial deficits comes to the forefront, most people suddenly develop a condition known as MEGO- my eyes glaze over. Yet it’s a subject well worth exploring because the growth and size of the U.S. budget deficit is such that it has become a ticking time-bomb in our midst that could explode within a few years. And when it does most people will be severely burned where it hurts the most, right in their pocketbooks. It will especially affect younger people just starting out in new jobs and careers. A tidal wave of overwhelming deficits could sink the stock market and most American’s savings and investment accounts, leading to a severe economic crises. It could make the 2008-2010 financial downturn look like a romp in the park on a Sunday afternoon. So lets try to figure out how we’ve arrived at this unenviable point in our history.
First a little perspective. The accumulated U.S. budget deficit in the nearly 200 years from the beginning of George Washington’s presidency to the end of Jimmy Carter’s reign in January 1981, stood at just under one trillion dollars. This despite the U.S. fighting in two world wars as well as the Korean and Viet-Nam wars which were extremely costly. In the ensuing 35 years, however, from Ronald Reagan to the end of Barack Obama’s term, the deficit will have mushroomed to just under $20 trillion, with annual deficits running at about half-a-trillion a pop. It was the the supposedly ultra-conservative Ronald Reagan that started us on the path toward major budget-busting. Under the 12 years of the Reagan and George Bush the Elder presidencies, the budget deficit grew from one to four trillion dollars, a 300% increase. Reagan accomplished this stupendous feat by hugely increasing military spending while significantly cutting income taxes, especially for the rich. Hmmnn. I wonder if it ever dawned on people within the Reagan Administration that if make large increases in expenditures while sharply cutting revenues, bad things were likely to ensue, budget-wise. Reagan believed he could make up the difference by curtailing social spending, but that turned out to be a total non-accomlishment.
The following 8 years under Bill Clinton’s presidency saw the budget-deficit monster actually being tamed. In 2 of those years, the Government surprisingly ran a budget surplus, a rarity never again seen. The period that Clinton was president, from 1992-2000, were probably the best years of peace and prosperity that the U.S. has experienced since at least the end of WWII, and perhaps in its entire history. Starting in 2001, however, when George Bush the Younger ascended to the White House, (even though Al Gore had actually won the election) we once again began to travel on the yellow brick road of financial irresponsibility. Bush began piling up large deficits the old-fashioned way, again by tax cuts for the rich and large increases in government spending. This time it was by enacting a prescription drug benefit under Medicare. The Bush presidency was further marred by an over-heated economy, especially in the housing market, which finally led to the collapse of the behemoth Wall Street investment firm known as Lehman Brothers, which further led to the collapse of the U.S. economy as a whole, and ensured the election of a rookie senator named Barack Obama to the Oval Office.
Contrary to popular belief, the large budget deficits that have accumulated under the Obama Administration have not been due to sharply increased spending; but instead were caused by a large drop in revenues due to the financial crises that lasted from 2008-20012. All those people that were out of work were certainly not paying any income or FICA taxes. Now that we’re back to near full employment, however, we’re still running half-a-trillion in the red, annually. All the while U.S. infrastructure is slowly but surely crumbling into disrepair. Roads are becoming alarmingly over-used with bumper-to-bumper traffic everywhere; bridges are virtually disintegrating before our eyes; water and sewer piping, some of which was built at the end of the 19th century, is rusting away to nothingness; the electrical grid is over-taxed, outdated, and highly susceptible to a terrorist attack; the list goes on and on. Just think what a joy your life would be if electricity ceased to exist. But where will we get the hundreds of billions of dollars needed to repair our aging infrastructure. Well, one solution might be to increase the revenue side of the equation.
But, you might say, we’re already being taxed nearly to death.Besides income and FICA taxes, there’s property taxes (even if you rent it’s in your monthly payment), taxes on all the utilities used, taxes at the gas pump, taxes on your cell phones and land lines, taxes in your internet provider’s fee; death taxes; the list is endless. Sort of reminds me of a song by the Beetles in the 1960s, called the “Taxman.” Some of the lyrics go as follows: “If you drive a car I’ll tax the street; If you try to sit I’ll tax your seat; If you get too cold I’ll tax the heat; If you take a walk I’ll tax your feet.” That pretty well sums up where we are on the revenue side of the balance sheet.
Over 80% of our annual 3.5 trillion dollar budget consists of only 5 items. Namely, Social Security, Medicare, Medicaid, Defense and Homeland Security, and interest on the debt. You can’t screw with interest on the debt or no one would ever lend to us again. The likely next president of the U.S. says he want’s to sharply increase spending on defense and homeland security, not decrease it. As well as increase infrastructure spending. Both candidates regard tampering with SS or Medicare to be the third rail of politics which invites instant execution. And so the budget deficit time bomb keeps ticking away.
I used to think that the only benefit of growing old was that I didn’t have to have colonoscopies anymore. But I’ve now discovered another benefit. I likely won’t have to be around when the financial roof of this country eventually collapses on our heads due to uncontrollable deficit spending.
realityincorporated 