Pelosi — We Don’t Have A Spending Problem!!

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While the U.S.’ designated imbecile was confusing the US Constitution, she was also babbling about how we don’t have a spending problem, as well.

As Breitbart puts it…..

On Sunday, House Minority Leader Nancy Pelosi (D-CA) took to Fox News Sunday to explain that America does not have a spending problem. “It is almost a false argument to say that we have a spending problem. We have a budget deficit problem,” Pelosi insisted.

Pelosi’s motion was seconded by Sen. Dick Durbin (D-IL) on NBC’s Meet the Press, where Durbin laughably explained that the sequester was “designed as a budget threat, not as a budget strategy” – and stated that the only approach to solving the budget problem was to raise taxes again.

Well, that’s the rub, isn’t it.  We just raised taxes just a few weeks ago, and now they’re coming back for more.  The problem one runs into is that our spending is independent of our revenues.  It always has been…… well for our lifetimes anyway.  Let’s look at the last few years…….

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Here we see the US spending increases near lineally.  It would be an almost perfect line except for the stimulus and bank bailouts.  And, we should note that our revenues took a horrible drop, because of the recession.  US spending increases independently of our revenues.  So, this begs two questions.  The first one, how much revenue (wealth extraction) is reasonable to run our government?  I mean, how much is enough and how much is too much?  How much taxes is too much?  I would submit that we are at that point now.  But, reasonable people can disagree.  In spite of some people arguing the Laffer curve doesn’t exist, it exists and is live and well.  We see it in Greece, we’re seeing it in Egypt.  We see it all over the world.  We’re exceeding the capacitance of wealth extraction.  At some point, the American people will simply lay down and they won’t work.  I think we’re seeing a lot of that today.  It will only get worse as the entitlements increase alongside the taxes.  As they lay down, the revenue base shrinks.  That’s just human nature.

But, what is the consequence of all of this?  So, we’re spending a bit more than we’re taking in.  So what?  Well, unless your name is Krugman or the Fairy Godmother, we all know there’s no such thing as “free“.  There is a cost to everything.  In deficit spending, there’s a cost.  Each annual deficit contributes to the accumulated debt.  We have to pay interest on the debt.  And how much is it?

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We should note, both graphs assume an improving economy.  We need an improving economy, but we can’t afford the escalating interest payments for such.  WE HAVE TO REDUCE OUR SPENDING!!!

Sources for the graphs here.

 

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28 Responses to Pelosi — We Don’t Have A Spending Problem!!

  1. kim2ooo says:

    Reblogged this on Climate Ponderings and commented:
    Too stupid to breathe on their own?

  2. Bruce says:

    As she has shown some difficulty counting to 2, asking her to count to 14 might be a challenge. “Shall not be questioned” is fairly precise. Pay up Nancy!

    If interest rate on Federal debt ever gets back to 6% the US is consitutionally screwed, to put it politely.

    • suyts says:

      I meant to spend some time on that but got distracted. Yes, if and when our economy gets to rocking again, we’re done. It’s a damned if we do and damned if we don’t situation.

  3. Jim Masterson says:

    What an ugly picture to wake up to. Is this the “hot chick” Tony is talking about?

    Jim

  4. kelly liddle says:

    If the debt payment graph is correct then that is over 10% of GDP already, so you would need a very lean government on taxes estimated to be around 27% of GDP. Suyts you seem to a point be arguing where things should be and 27% for tax is reasonable and can provide a good social net but it can’t provide that anymore I don’t think because of interest payments.

    One thing I have been thinking about is your old age pension and how Phil sort of referred to it as not a social welfare entitlement but as something that has been paid for, this is a little contradictory if you consider the payment into that scheme a tax which is what you refer to as payroll right? http://www.census.gov/compendia/statab/2012/tables/12s0540.pdf This table shows that medicare and disability, survivors, old age pensions dwarf the other parts of welfare. It is a pity that disability and old age pensions are put together because I am curious about that split.

    • PhilJourdan says:

      I am curious about the split as well.

      But as for Old Age pension, if a private company did what the Feds are doing, they would be tried and convicted of Fraud. Since the beginning of the Old Age pension up until 1982, the amount paid out far exceeded what the contributors paid in. Since the money is not placed in an Annuity, that is the only benchmark that really can be used.

      However, for everyone retiring after the late 80s, they are paying in much more than they get out. At least the old age part. The fund, understandably so, has been turned on its ears. Which means that all retirees (except perhaps the precious few who live well into their 90s – the break even age has been computed at 88 – with an ALE of only 78, that puts them 10 years behind the curve) are subsidizing the disability portion. I doubt we will ever see a fair accounting of a split. It would probably lead to a new revolution.

    • suyts says:

      Kelly, our government in the very near future will be faced with enormous challenges. (Our social security being one of them.) The point I’m trying to make is, that we need the ability to respond to those challenges. Interest on debt, of course, brings absolutely no value. It is simply money gone. Unless we change, and soon, the government will be very limited in its ability to respond.

      And, yes, I’ll break down the payments (old age payments) from the other horrid spending of the social security system one day.

      As to the graphs, be sure to note the years. The right ends of both are based on assuming a strong recovery. I doubt that will happen.

      The point is, in the US we have defense spending and entitlement spending. These are challenges we need to deal with. If the interest on the debt becomes as large as it is projected in 2017, we’ll have very little latitude. In fact, we’ll be reduced to parlor tricks with our money. What will happen is that our SS will be absorbed into the general fund. This move in itself will eliminate some debt. But, it won’t fix the underlying problem of spending. After that, we’ll try to inflate our debt away, destroying the people on fixed incomes. —— the end.

      • cdquarles says:

        Not only that, the current artificially low visible interest rates are destroying people who are trying to fund their own futures with current nominal money. The real (Internal Rate of Return rates) rates are much higher, which gets manifested in the ‘pushing on a string phenomenon’ now known as the ‘Recovery’ (not). An unfettered recovery mirrors the decline. That the current ‘recovery’ isn’t sharp and visible (the Reagan era one was very visible at this point) shows the insanity of ‘Keynesian’ economics (James, put up those labor participation rate graphs again, but carry them back to the 20s if you can and use a zero baseline, too).

    • cdquarles says:

      Kelly, here’s something you need to know. Before FDR (D), there was no Federal ‘Social Safety Net’. There was a private ‘Social Safety Net’, which we still have; though the government ‘competition’ has seriously damaged it. Some States and local governments ran ‘Social Safety Nets’, but these were dwarfed by the private one(s). Getting rid of the Federal one will not mean ‘No Social Safety Net’. It will mean that the private one(s) will be challenged and revived.

  5. cdquarles says:

    For most of the history of the US, Government spending total amounted to 7 percent of estimated GDP. It went up with wars and down when the wars were over. That changed after 1900. More specifically, 1917. Several big events occurred between 1900 and 1920. Even in the early 20s, the post WW1 ‘panic’ was over in 18 months because Cal Coolidge refused to do ‘Keynesian’ economics. He did ‘Supply Side’ economics. What wasn’t truly realized by most at the time would be the pernicious effect of the Federal Reserve. When the Crash happened (and remember that Europe had tried Keynesian stuff) Hoover, the Progressive he was, did Keynesian economics. Government spending has never been below 10% of GDP since, with the Federal portion rising to 18% (the rest of government here eventually matched it). Since the mantra has been ‘balance your budget’ but ‘never cut spending’, the response was ‘raise taxes’ and that turned the Crash into the Great Depression. (Going off a real Gold standard didn’t help, btw, as that would have ‘forced’ governments around the world to cut spending. FDR doubled down on Hoover. Hoover (R) was blamed for the Depression. That FDR deepened and prolonged it never gets told. The US presidents who really tried to get a handle on this problem were JFK (1st post WW2 marginal tax rate reduction) and RWR (2nd and 3rd). Carter, God bless him, was browbeaten into getting rid of some WW2 left over price controls in some sectors (Price controls never work. 6000 years of history shows it. 6000 years of monetary history also show that governments will always try to inflate their way out of debt, which also ends badly every time.)

    • suyts says:

      “6000 years of monetary history also show that governments will always try to inflate their way out of debt, which also ends badly every time.”

      And, that’s exactly where we’re heading. We can all see it except the lunatics in charge.

      • kelly liddle says:

        Most I think can see it, your politicians and ours for that matter are highly intelligent the question is are they highly moral and not guided too much by any ideology (ideology means someone can make an emotional decision not a logical one much the same way a gambler would). Many I think just hope they are not holding the hot potatoe at the time. Just like some of the quotes from the S+P ratings thing.

        • PhilJourdan says:

          “your politicians and ours for that matter are highly intelligent ”

          I take it you have not read Suyts Pelosi Articles? They are telegenic, they are not intelligent.

        • kelly liddle says:

          I had to look that word up “telegenic” . This is a skill that requires intelligence, and she also must be reasonably intelligent to become minority leader as there would be many going for that job. Her personal ideology or her like of power is what is making her not a good representative.

          I would say exactly the same about any Republican who for example believes that somehow not increasing military spending at the rate they want (apparently will go down versus inflation but up in dollars) is going to somehow put your country in danger. You don’t need to control the entire world ex China and Russia to be safe and can’t anyway, having money in the bank would be far more effective if you actually did have a military conflict that became neccessary. I would argue that basic economics would mean that military spending should be decreasing to achieve the same outcome because the electronics in major weapons systems which is a major cost should be getting cheaper not dearer. Another thing is if you give any government department more money they will spend it with no guarantee of a better outcome. If you look at various departments or sub departments around the world and their function the best practice tends to be less than half the cost of a badly functioning department in another country with an equivalent outcome. A simular outcome is good enough for me there is no need for the government to be the best at anything except possibly fiscal responsibility.

          I know I strayed off the topic a little but yes you do have a spending problem and so does Australia at the moment, it is just we are much further from realising it and it is relatively easy to reverse before real problems. Unfortunately you have reached the real problems stage in my opinion.

        • PhilJourdan says:

          Kelly, I think you need to find a new dictionary. Telegenic has nothing to do with intelligence. All the contestants of the Miss Universe pageant are telegenic, but intelligence is the exception, not the norm among the contestants. So it is with Politicians. in 1960, the age of Telegenic Politicians (at least here) was born when Kennedy beat Nixon because of his looks, not the content of the debate.

          As for becoming minority leader, that is a matter of stamp gathering. Gather enough, and you win. Nothing more. That is a function of longevity, not intelligence. many think that Hitler was Intelligent. Why? Have you read Mein Kampf? The man was a raving narcissist! But he had a magnetism about himself that drew others to his lunatic ravings. And that is why he got to where he did, not intelligence. Politics never requires intelligence. read Machiavelli. It requires guile, deceit, treachery and lying. Insincerity helps as well. But not intelligence.

          BTW: I do not know if you noticed, but Suyts has recently come to call the Republicans – “Repards” – hardly a complimentary name for them. While we especially lampoon the Democrats for their insistence upon stupidity, you will not find many around here who praise Republicans (as a party – there are individual exceptions). It is just they are not AS stupid as democrats – not that they are Mensa candidates.

        • kelly liddle says:

          Another thing I just thought of is if you count the cost of the debt and interest payments on a pro rata basis for military spending it is likely spending is still going up more than inflation.

          It might seem that I am attacking Republicans and probably I am but no more than a Ron Paul would. Military cuts would have the least effect on the American people I believe but of course cuts must be made in social security and healthcare spending etc. because you have reached the stage if you had no military at all you would still be running a deficit.

        • PhilJourdan says:

          “Military cuts would have the least effect on the American people I believe”

          Seems I heard that quote before December 7, 1941 and September 11, 2001.

          Just out of curiosity, how many people have to die for it to be an “effect”?

        • kelly liddle says:

          Phil
          I am not saying not have a military just that yours is too big and with out a doubt inefficient in spending. “It requires guile, deceit, treachery and lying.” Yes and you need to be intelligent to do these things better than others. Yes I know the people here are not exactly greats fans of the Republicans as a party. Actually you have made a good point in that here unlike other blogs it is sort of feel free to criticise all politicians without an avalanche of attack.

        • PhilJourdan says:

          Kelly, we had a military on December 6, 1941. And some thought IT was too big. so again, how many people have to die for it to be an “effect”?

        • PhilJourdan says:

          BTW: If you read the US Constitution, you will find that the Federal Government is responsible for few things. One of those “few” things is the “common defense”. What is not in there is Welfare programs, handouts, or usurping charity.

        • kelly liddle says:

          Phil
          Of course I can’t give any exact figure on what military spending should be for your country. It also depends on if you think you are the policeman of the world. How about 25% of world military spending would that be a goer with you?

        • PhilJourdan says:

          Kelly, I merely pointed out a historical lesson and asked a question. I offered no secret solution.

          When it comes right down to it, the only constitutional spending is Defense. All the other is pork, regardless of your affinity for forced enslavement.

      • suyts says:

        Well, I agree some want to make sure they’re not left holding the “hot potatoe”, but, I think you give them too much credit for their intelligence. I honestly don’t believe very many of them are very much above average intelligence. I think this is one of the problems our societies face today. We don’t place our best and brightest in positions of authority. In the US we most place lawyers who can’t make the big time in private practice.

  6. cdquarles says:

    One other thing. A steeply ‘progressive’ income tax will result in tax revenue being more volatile, relative to the economy that supports it, than a mildly ‘progressive’ or better yet, flat tax.

    Since the end of the Reagan era, our tax system has gradually become more steeply ‘progressive’. Extend that graph back to the 50s and you’ll see what I mean.

  7. Latitude says:

    your politicians and ours for that matter are highly intelligent
    =============================

    “We avow the First Amendment. We stand with that and say that people have a right to have a gun to protect themselves in their homes, in their jobs, where ever… in their workplace. For recreation, for hunting and the rest. So we’re not questioning that they do that,” Pelosi inarticulately told Wallace.

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