A Word About the Debt and Deficit

Image via WikipediaDuring the entire debate on raising the country's debt ceiling, I deliberately stayed away from posting anything about the subject.  It had been my hope, though I knew it was not likely, that the idiots in Congress and the White House would do the right thing and actually address the problem of our ever increasing debt.  With the news on Friday evening that Standard & Poor's has downgraded the US debt from AAA to AA+, I want to make a few comments.  S&P has even stated that a further downgrade is possible.

First, the downgrade should not really come as a surprise to anybody.  For months, the credit ratings agencies had been warning that unless the government fundamentally addressed the spending issue they would be in danger of having their credit rating dropped.  Simply raising the debt ceiling so that the country could borrow more money to pay the bills without addressing the deficit issue long term would not guarantee keeping the AAA rating.

The problem with the deal that was reached to raise the debt ceiling and cut some spending really has done nothing to ease the actual problem.  Sure they say they are going to cut over $2 trillion in spending over the next 10 years, but they actually cut nothing.  It is nothing more than typical Washington speak.  The cuts are actually reductions in the rate of spending thanks to the use of baseline budgeting which automatically assumes increases in spending at a predetermined rate.  Even with the proposed "cuts" the debt will still increase greatly over the next 10 years.

As much as Democrats would like to increase revenues by raising taxes, that really is not the answer.  Historically, tax revenues have averaged around 18% of GDP regardless of tax rates.  There have only been a few times when revenue has been above 20% of GDP.  However, government spending is currently running at 25% of GDP.  The real issue is spending, not taxes.  The real way to raise revenue is to grow the overall economy by growth in the private sector, not through the government.

Both sides need to get on board with the idea of balancing the budget.  The rest of us have to do it, most of the states have to do it, so it is the least we can expect from the federal government.  I know from experience that consistently paying for one's obligations with borrowed money is a recipe for eventual disaster.  One of the best plans out there is the one that Connie Mack's penny plan.  The plan call for the elimination of baseline budgeting.  It calls for a 1% cut in actual spending, or a penny out of every dollar in the budget.  That can hardly be called draconian or severe cuts.

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• S&P's John Chambers Defends Agency Decision to Downgrade US Credit Rating - ABC News (news.google.com)
• The "Penny Plan:" A 1% Cut In Real Spending (Not the Rate of Growth) For Six Years (minx.cc)

Osama bin Laden Killed: Welcome to Hell

Image by Chris.M.G. via FlickrI was sitting here on the couch watching the local evening news when they announced that President Barack Obama was going to address the evening shortly before 11:00pm Eastern Time.  Usually, I dread to hear him speak, however, I knew that if he was going to address the nation that late in the evening that it had to be big.  It was.

As the newscast continued they broke little pieces of the news of the evening, that US Special forces had killed Osama bin Laden, founder and leader of Al-Qaeda.  He was killed in a compound in Pakistan not far from a Pakistani military installation.  So much for his being holed up in a cave.  It also makes one wonder the veracity of the Pakistani claims that they had no idea where bin Laden was.

First, a hearty congratulations and thank you to the Special Ops forces that put their lives on the line to carry out this risky operation.  Even better is the fact that they got the SOB is that there were no injuries to our troops.  Thanks to our intelligence community for their diligence in pursuing him.  Finally, congratulations to the President for ordering the action.  I wasn't sure he had the stones to do it.

Normally, it would be inappropriate to rejoice in somebody's death, however, in this case I think it is warranted.  As Country music star Blake Shelton tweeted last night when the news broke "Sorry if this seems disrespectful but I'm so glad that piece absolute shit Osama is dead.."  While the death of bin Laden is welcome news to those of us who recall the tragedy of 9/11, we must remain vigilant.  There remain those who will replace bin Laden and want to avenge his death.

I have posted Trace Adkins song "Welcome to Hell" before.  Today it seems appropriate to post it again today.  It see,ms appropriate to post it again today in light of the news since Trace wrote the song for Osama bin Laden and his ilk.

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• President George W. Bush Releases Statement After Osama Bin Laden's Death (sugarslam.com)
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Music Monday-Damn Yankees "Don't Tread On Me"

There is a foul odor coming from the District of Columbia. It smells like tyranny. In light of Congress and the White House passing legislation directly in opposition to the will of the people, I decided for something a little different for my Music Monday choice. Somehow, Damn Yankees and "Don't Tread On Me" seems appropriate today.

Come join Music Monday and share your songs with us. Rules are simple. Leave ONLY the actual post link here and grab the code below and place it at your blog entry. You can grab this code at LadyJava's Lounge Please note these links are STRICTLY for Music Monday participants only. All others will be deleted without prejudice.


PS: Because of spamming purposes, the linky will be closed on Thursday of each week at midnight, Malaysian Time. Thank you!

Cash For Clunkers Follow Up

Shortly after the government's Cash For Clunkers program ended, I posted about the initial results of the program.  At the time I tried to identify the "winners" and "losers" of the program.  Here is what I said at the time:

So the big winners in the "Cash For Clunkers" program are the people who were able to take advantage of the program by having additional dollars towards a new car. In addition, Ford, Honda, and Toyota were the industry winners.

The losers are Chrysler, General Motors, the government, and the US taxpayers. The taxpayers are on the hook for bailing out GM and Chrysler and for funding a program that did nothing for the two companies that the taxpayers basically own. The other losers are those people who would have been willing to buy a used car but will see used car prices rising because of all the "clunkers" taken off the market reducing supply.

Well, Edmunds.com has done a study and here is what they found.  During the program, they show that a total of 690,000 cars were sold.  Their analysis suggests that the program may have added a total of 125,000 sales.  Based on the cost of the program, that works out to $24000 per car.  If you really stop to think about it, this makes perfect sense.  After all, a fair percentage of the cars sold would have sold regardless of the Cash-for-clunkers program.  It is logical, therefore, to calculate the cost per car on the incremental sales that the program generated.

Needless to say, the very thin skinned White House had to issue comments critical of the study. This drew another nice little press release on Edmonds defending their analysis. 

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How Do They Sleep At Night?

Image by Getty Images via Daylife

Seriously, how do politicians sleep at night or how can they look at themselves in the mirror? I know that it has been a few days since the White House released their updated projection on the federal budget deficit for the next decade will be closer to $9 trillion as opposed to their original projection of $7 trillion.

The only reason I decided to post about it tonight was the headline that I saw when I received my CNSNews.com email news brief this morning. The headline read "Obama’s ‘Path Toward Fiscal Discipline’ is Paved with Average Annual Deficits of $900 Billion, Says White House Report."

This year's budget deficit is expected to be $1.58 trillion. Prior to taking office, the deficit in the last year of the Bush administration was $458 billion. The average deficit for the next 10 years is expected to be double the highest deficit prior to Obama taking office.

This is a "path toward fiscal discipline?" That they can say something like this with a straight face is simply mind boggling to me. What planet are these people living on? Do they really expect us to believe anything they say when they make asinine statements like these? I think I will go out this weekend and max out my credit cards. After all, if our out of control government spending is "fiscal discipline," then the same must hold true for me.

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