The Federal Budget And Why The US Is In Trouble

[rescueme]

Quote:

Originally Posted by GregLee none of you seems to be able to say exactly why.

Apparently not to your satisfaction.

So on a personal basis, you spend more than you make, and are satisfied to just pay the interest on your outstanding balance?

Of course you won't live forever. In most cases, when you die, your accumulated (e.g. CC debt) is cancelled.

But what about a sovereign nation that is responsible for its debt? More specifically, its taxpayers of many generations are responsible for that debt.

Do you think that is OK?

BTW, I don't. I'll pay my own way; it's not up to the next generation (or others, if I have no childern) to assume "my" debts.

[Independent]

Quote:

Originally Posted by JOHNNIE36 I never followed government spending much and hence don't much about about the budget process. I always thought the first thing I would eliminate in the budget would be foreign aid; however, a friend told me that foreign aid was a money making proposition. The government doesn't really give "them" cash, rather it's giving goods and services provided by American business and industry, thereby creating work for our people. Anybody got a handle on this topic? I'd be interested in knowing how foreign aid really works.

The important fact is that foreign aid is so small that it's an afterthought in terms of the budget. In 2010 it accounted for 0.8% of total spending.

You can get a good view of the budget here: Budget of the United States Government: Historical Tables Fiscal Year 2012

To find foreign aid, open table 3.2 and look at item numbers 151 and 152.

If we want to balance the budget by cutting spending, we need to cut Medicare and Defense and (eventually) Social Security.

[GregLee]

Quote:

Originally Posted by rescueme So on a personal basis, you spend more than you make, and are satisfied to just pay the interest on your outstanding balance?

No, I don't owe any money at all, save for the current month's CC bills. Do you really think this is relevant?

[NW-Bound]

Quote:

Originally Posted by Independent If we want to balance the budget by cutting spending, we need to cut Medicare and Defense and (eventually) Social Security.

Thank You!

Doing anything else is like beating around the bush, like a homeowner who is in arrears on his mortgage, refusing to move out of his McMansion thinking he could remain solvent by giving up his Starbucks coffee.

[Midpack]

Quote:

Originally Posted by Independent If we want to balance the budget by cutting spending, we need to cut Medicare and Defense and (eventually) Social Security.

Amen. From my earlier post (2010 actual spending):

24.5%	Defense
22%	Soc Sec
24%	Medicare/caid
6%	Interest
23.5%	EVERYTHING ELSE

Our deficit is 37.5% of of spending!!!

[Independent]

Quote:

Originally Posted by Midpack As you know, no direct answer is possible, but FWIW The Tax Foundation - How Much Did the Bush Tax Cuts Cost in Forgone Revenue?

Thanks, good source. I get somewhere in the vicinity of $2 trillion, give or take a half trillion. That's a good chunk of the total debt held by the public of about $5 trillion before the housing bubble popped.

One of the questions is how much dynamic offset we should make to the static cost. When Bush was president (2006) the Treasury tried to estimate that. We all know that any such estimate is very sensitive to input assumptions, but I'd guess that the Treasury in 2006 was unlikely to intentionally bias their estimates to make the dynamic effect small.

They didn't end up with an explicit number, but if you read the report, it seems to be that the dynamic cost was more than 90% of the static cost.

http://www.treasury.gov/press-center...july252006.pdf

[rescueme]

Quote:

Originally Posted by GregLee No, I don't owe any money at all, save for the current month's CC bills. Do you really think this is relevant?

I think it is.

If the federal (or any) government paid their "bills" in the same manner, there would be no problem.

However, they are not. The money has to come from somebody (you, me, in reduction of services and possible increases in taxes) or from current and future generations.

My question to you. How do you get the federal government to act in the same fiscal manner as you do - that is managing your debt, without defaulting, or the reduction of the value of a dollar (e.g. printing money - monetize the debt) or pushing the payments to somebody (or some generation) else?

[FinanceDude]

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Originally Posted by donheff I hope you were both railing against the original Bush tax cuts and last year's extension of the Bush tax cuts because both actions vastly exacerbated the problem.

The Stimulus plan that gave special interest groups money also exacerbated the problem.......

[Westernskies]

Quote:

Originally Posted by Midpack In fiscal 2010, the Fed spent $3,456B. Of that $847B (24.5%) was Defense and a relatively trivial $92B (2.7%) was Transportation. SocSec was $756B ( Same period revenue was $2,163B for a deficit of $1,294B. So yes, the latest budget cutting battle was very much ado about nothing...

IMO, the problem is that, too many people (John and Jane Q and politicos alike) , these sacred cows are "trivial" to the budget. (only a few BILLION each... ) The mindset is that these "trivial" numbers are OK, since they individually represent only a small % of the total budget. So, we continue to spend those billions we don't need and add new sacred cows each year. DOE, TSA, etc...do we really need all the government we are paying for? We need to change that mindset, and get back to basic financial responsibility, and quit spending money we don't have- even "trivial" amounts...quit rationalizing fiscal irresponsibility in small doses.

[chinaco]

Taxes will be going up. If nothing else, that GWB tax break will expire.

[Westernskies]

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Originally Posted by chinaco Taxes will be going up. If nothing else, that GWB tax break will expire.

It already expired on Dec. 31, 2010. Check the executive signature on the legislation renewing it...

[rescueme]

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Originally Posted by Westernskies ..even "trivial" amounts...quit rationalizing fiscal irresponsibility in small doses.

Yes, if you can't handle the "small numbers", what are you going to do with the ones that really count? ...

[FIREd]

It should be easier to control your expenses when your are spending your own money. You worked long hours to earn it and you understand the value of it. Nonetheless, given the number of people who are overextended financially, many people still can't get their own spending under control.

So how much control can you expect people to have over their spending when the money they spend is in fact money they confiscate from other people and when they have the power to confiscate some more whenever they need to?

[Independent]

Quote:

Originally Posted by ERD50 Is independence on foreign oil really so important? If I think of this in the micro-economic sense, the ERD household is dependent on all sorts of 'foreign' (to our household) resources. We are not self-sufficient. We trade our resources ($ and/or labor) for other resources, many of which we could not do without. Yet, this does not seem like a problem at all, and it has been sustainable for as long as I've been alive, and I don't see an end to it, nor do I desire an end to it (I don't plan on learning how to do my own surgery, or build a car myself). In fact (I think samclem has pointed this out before) , getting these resources at the lowest cost to us is exactly what we should do. Foreign oil must be cheaper than domestic oil, so why not buy it from the cheaper sources? It's the same make/buy decision I make with every single purchase (grow my own food, buy it?, etc). And to be consistent, I'm against subsidies. So yes, oil needs to stand on its own for this to be meaningful. Let the oil companies buy their own protection, if that is what it takes to deliver 'foreign' oil. -ERD50

I think the sequence goes like this:
1) From a macro view, any sudden change is bad for the economy. Sudden changes always generate pain because we can't adjust quickly enough.
2) Oil is so important to our economy, that sudden changes in the price of oil can have big costs beyond the simple price difference. (a slow increase in the price of oil wouldn't be a big deal)
3) Because of (2), every administration since Eisenhower has tried to stabilize prices by stabilizing the mid-east. That has meant trying to get friendly governments that provide stable supplies.
4) Step (3) means military threats and intervention. Maybe half our military spending (or $300 billion in today's terms) since the 1970's has been directed at stable oil prices, or the after effects of large sums flowing to dictators.

So that amount of military spending is a subsidy which the oil companies can't directly purchase in the open market. The result (IMO) is that we should have been taxing crude oil at about $1 per gallon for the last 30 years just to pay for this subsidy.

If we had done that, Americans would have chosen more fuel efficient cars, houses closer to workplaces, alternate energy sources, etc. We'd still be looking at long term increases in the price of energy, but the situation would be more manageable. And we might have saved some lives, too.

[dex]

Quote:

Originally Posted by GregLee It's okay by me. I see a lot of huffing and puffing about how disastrous it will be unless we balance the federal budget, and occasionally I insert into a thread a plaintive request for some evidence that we can't just keep the deficits going forever. There seems to be unanimity that we can't, but none of you seems to be able to say exactly why.

Look for articles for the relationship between USA debt and the US$ being a reserve currency. Also, the relationship between the US$, international trade, pricing and US debt. That should be a good start.


You might find this interesting.
http://www.petersoninstitute.org/pub...guson-2010.pdf

[novaman]

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Originally Posted by Independent If we want to balance the budget by cutting spending, we need to cut Medicare and Defense and (eventually) Social Security.

Agreed- But at this point I can't fathom it ever happening. Look at all the ballyhooing over the proposed defunding of Planned Parenthood to save a few billion and how it was going to affect women's healthcare.

[sheehs1]

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Originally Posted by Midpack As you know, no direct answer is possible, but FWIW The Tax Foundation - How Much Did the Bush Tax Cuts Cost in Forgone Revenue?

Thanks for the link Midpack. I've read...but want to go thru it again....

[eridanus]

Quote:

Originally Posted by Westernskies IMO, the problem is that, to many people (John and Jane Q and politicos alike) , these sacred cows are "trivial" to the budget. (only a few BILLION each... ) The mindset is that these "trivial" numbers are OK, since they individually represent only a small % of the total budget. So, we continue to spend those billions we don't need and add new sacred cows each year. DOE, TSA, etc...do we really need all the government we are paying for? We need to change that mindset, and get back to basic financial responsibility, and quit spending money we don't have- even "trivial" amounts...quit rationalizing fiscal irresponsibility in small doses.

I think the "it's trivial" argument applies to health care, too. "That only saves us 2.5%, so why bother?" Those small expenses do add up. That's not to ignore the 3 elephants in the room, of course.

[NW-Bound]

Quote:

Originally Posted by Westernskies ...quit rationalizing fiscal irresponsibility in small doses.

Quote:

Originally Posted by rescueme Yes, if you can't handle the "small numbers", what are you going to do with the ones that really count? ...

I have to agree with that. But look how drawn out and painful the process has been.

Being a pessimist as I always have been, I am afraid that Bill Gross's prediction in the article I cited earlier will play out in a fatalistic manner.

[sheehs1]

Quote:

Originally Posted by NW-Bound Well, when Joe and Jane Blow have to park in a long line waiting for their turn to fill up their cars and to pay what Europeans have been paying all these years, they get really, really mad and demand the heads of oil executives, politicians, heck, any and everybody. "Vroom, vroom"... It's the American way, don't cha know?

Anyone want to venture a guess....at why Congress has not voted on a mandate for natural gas modifications for engines? Is it not doable or realistic?

To hear the CEO of Chesapeake Energy talk...it has been what has held back the price of natural gas and we supposedly have untold supplies of natural gas. So...could it be as simple or as greedy as those that own the oil wells or are invested in ...oil profits?