Houston, We have a [Spending] Problem

The feds rolled up another $1.1 trillion deficit for the year that ended September 30, which was the biggest deficit since World War II, except for each of the previous three years. President Obama can now proudly claim the four largest deficits in modern history. As a share of GDP, the deficit fell to 7% last year, which was still above any single year of the Reagan Presidency, or any other year since Truman worked in the Oval Office.

This is in despite of the fact that Federal Revenue has come back to its previous all-time high posted in 2007.  In other words, since 2007, Federal Receipts (tax revenue and such) is up 0.1%, while spending is up 28%.    We are spending $3.8 trillion per year! or $800 billion more than the last pre-recession year of 2007.   That is the equivalent of the "emergency" Federal stimulus funds added to the baseline spending for every year going forward. 

In spite of the rhetoric about the Bush Tax cuts and unfunded wars, the highest deficit on an annualized basis maxed out at $400 billion.  That is one third the deficit in 2011.  In fact, all of the years combined of both wars in Afghanistan and Iraq, you get last year's deficit.



Currently, the top 1% of income earners (those with salaries, dividends and capital gains roughly above about $380,000) paid a total of 38% of all individual federal income tax revenue.  If you take in the top 50% of income earners (which includes both the top 1%), they paid 97.3% of all individual federal income tax revenues.   Those figures don't include social security tax which are not progressive, but are not intended to be progressive.  Social Security is supposed to be a safety-net insurance program put in place by the government to make sure its citizens save for retirement.  It is not intended to be a wealth transfer program. 

Obama's plan to ask the rich to "pay a little more" yields about $80 billion.   Barely a drop in the bucket.   If we taxed the top 1% of Americans 100% of their income, if we took it ALL, it would generate about a trillion dollars for the government’s coffers or slightly less that year's deficit.  Conversely, the top 5% earn down to something just less than $200,000 per year (closer to $145k, but I'm not sure the figure).  If we raise the current tax rates of the top 5% of earners by doubling their current rate, it would only add about $600 billion in revenue or 1/2 the deficit.   The Fiscal Cliff budget recalls all tax cuts from the Bush Tax cut for all earners, as well as the expiration of the payroll tax cuts implemented over the past two years, and those two items only reduce 2013 budget by approximately $300 billion.  Throw in all other fiscal cliff and sequestration items and it only gets you to somewhere south of $500 billion.  - See Here

We have a SPENDING PROBLEM!   It's not new.  We had a spending problem in the George W. Bush years.  In this blog, I chastised him for not vetoing enough spending bills.  As a fiscal conservative, he should have reigned in a spending-happy Congress.  He didn't.  However, it has only gotten worse.  WAY WORSE.

Oh - and don't forget - this is just the DEFICIT.   We have a while pile of Federal Debt that we need to figure out how to repay in the amount of $16 trillion.



The debt is $51,648 per citizen as I write this.  But remember, not everyone pays taxes.  So that number is actually $141,735 per taxpayer.   Gross U.S. Debt to GDP is slightly over 100% of GDP.  Greece is about 144% and Spain is 116%.   Annual interest to date is about $12,500 per citizen.  But also remember, interest rates are at historic lows.   God help us if rates rise.   And that's just debt.  Total unfunded liabilities including Social Security, prescription drug and Medicare total slightly over $1 million per taxpayer.  Yes, $1 million.