The Economic Collapse
February 15, 2011
Is Barack Obama trying to play a joke on all of us? The budget that the Obama administration has submitted for fiscal 2012 is so out of touch with reality that it may as well be a budget for “Narnia”, “Fantasy Island”, “Atlantis” or some other mythical land. You can view the hard numbers for Barack Obama’s 2012 budget right here. Obama’s budget assumes that the U.S. will experience economic growth of over 5 percent for most of the coming decade. That is so far-fetched that “optimistic” is not the right word for it. It also assumes that U.S. government income (primarily made up of taxes on all of us) will more than double over the next ten years. For 2011, the budget projects that the U.S. government will take in a total of 2.1 trillion dollars, and for 2021 the budget projects that the U.S. government will take in a total of 4.9 trillion dollars. For the Obama administration to assume that the federal government will be able to drain an extra 2.8 trillion dollars per year out of the American people by the year 2021 is ridicul0us beyond belief. In his new budget Barack Obama does propose some very, very modest spending cuts that he knows have no chance of getting through Congress. Barack Obama’s budget for 2012 also does not even attempt to make any cuts to entitlement programs such as Social Security and Medicare. In essence, you can sum up Barack Obama’s budget proposal for 2012 by saying that it is a complete and total joke. This budget is so delusional and so out of touch with reality that it is hard to imagine anyone taking it seriously.
Oh, but Obama is really trying to sell it hard. When Obama unveiled this new $3.7 trillion budget for 2012 at a middle school in Baltimore, he insisted that his plan will make it “so that every American is equipped to compete with any worker anywhere in the world.”
Well, that is a nice sound bite, but as I have written about previously, unless Barack Obama suddenly finds a way to stop multinational corporations from paying slave labor wages to their workers on the other side of the globe the job losses in America are going to continue.
But that is a topic for another day. Getting back to the 2012 budget, Obama is proposing to cut more than a trillion dollars from federal budget deficits over the next ten years.
That sounds really good until you figure out that means that the cuts only amount to about $100 billion a year. Considering the fact that Obama’s budget is projecting that we will have a $1.6 trillion budget deficit this year alone, that really is not a whole heck of a lot to be cutting.
The truth is that Barack Obama should be proposing spending cuts that are at least ten times as large if he was actually serious about addressing our budget woes.
But at least Obama is not proposing an increase in spending.
Oh wait, he actually is.
In fact, under Obama’s budget, U.S. government spending will soar from 3.8 trillion dollars this year to 5.6 trillion dollars in 2021.
But the mainstream media is solely focusing on the budget cuts that Obama is proposing.
Apparently they are trying to cast him as some sort of “fiscal conservative”.
Try not to laugh.
But the modest cuts that Obama is proposing are at least some place to start.
Under Obama’s budget, approximately half of all government agencies will have their funding decreased from 2010 levels.
In fact, approximately 33 billion dollars would be saved by scaling back or shutting down 200 federal programs.
Of course Obama’s fellow Democrats in Congress will never go along with many of these cuts, but at least it is something.
However, this is where most in the mainstream media stop their analysis.
They don’t take a closer look at the numbers in Obama’s budget.
They don’t question the wacky economic growth assumptions.
They don’t question the bizarre government income projections.
But even with the Obama administration’s crooked numbers, the federal deficit still never drops below 600 billion dollars over the next decade and a total of 7.2 trillion dollars is still added to the national debt over the next decade.
If economic growth ends up being much lower, or if the U.S. government is not able to get twice as much money out of the American people by the end of the decade then the projections would look much, much different.
So where does the Obama administration assume all of that extra money for the government is going to come from?
Oh, from raising taxes of course.
The Obama budget assumes that there will be significant tax increases starting in the year 2013.
A recent article on CNBC summarized some of the tax increases that the Obama budget calls for….
The plan unveiled Monday includes tax increases for oil, gas and coal producers, investment managers and U.S.-based multinational corporations. The plan would allow Bush-era tax cuts to expire at the end of 2012 for individuals making more than $200,000 and married couples making more than $250,000.
Wealthy taxpayers would have their itemized deductions limited, including deductions for mortgage interest, charitable contributions and state and local taxes.
There are many liberals (such as my friend Gary) that would love to see these tax increases go into effect, but Obama knows that there is no chance that they will ever see the light of day unless the Democrats retake the House of Representatives.
But most of Obama’s budget for 2012 is based on things that simply never even have a chance of happening.
The reality is that Obama’s budget for 2012 is a great work of fiction.
Meanwhile, the U.S. government continues to accumulate staggering amounts of debt.
In fact, Obama’s budget admits that we will witness the biggest one year debt increase in history this year.
In 2011, the gross federal debt with surpass 15 trillion dollars. In fact, it is being projected by some analysts that this will be the year when the debt finally becomes larger than the size of the entire U.S. economy.
But Obama insists that he is taking this debt problem very seriously.
Obama insists that he is committed to making “deep” cuts.
In fact, as he announced this new budget Obama stated that these budget cuts hit “many programs whose mission I care deeply about, but meeting our fiscal targets while investing in our future demands no less.”
Do any of you actually believe him?
Not that the Obama administration is in an easy position. The truth is that the U.S. government (both Republicans and Democrats) have been horribly irresponsible with our money for decades.
The 14 trillion dollar national debt problem that we have now did not develop overnight.
Neither will it be solved overnight.
But Obama is not even trying to address the tough issues such as Social Security and Medicare.
The truth is that the federal debt problem cannot be solved without addressing our out of control entitlement programs.
So why didn’t Obama address them in his budget?
Well, the reality is that Obama is not stupid. Social Security and Medicare are political sacred cows. Obama is not going to do anything at this point that would cost him millions of votes in 2012.
So Barack Obama ignored most of the $4 trillion in budget cuts recommended by the White House-appointed deficit commission.
It kind of makes you wonder why Obama ever appointed a “deficit commission” in the first place.
One area that Obama does attempt to cut in his new budget is military spending. Obama’s budget for 2012 sets military spending at 5 percent below what the Pentagon requested for 2011.
In fact, Obama’s defense budget would slash military spending by $78 billion over the next five years.
His budget also assumes that we are not going to get involved in any more wars, which is not necessarily a safe assumption.
So will these military spending cuts actually get through Congress?
The Republicans control the House of Representatives, and they are not likely to take too kindly to large cuts to the defense budget.
In fact, the truth is that not too many of Barack Obama’s spending cuts are likely to survive in Congress.
As a recent article on CNN explained, Barack Obama’s budget plan must navigate a vast array of congressional committees in the coming months and by the time it emerges it is likely to be radically changed from its current form….
Before it gets back to Obama’s desk for a signature, the spending blueprint will go through no less than 40 congressional committees, 24 subcommittees, countless hearings and a number of floor votes in the House and Senate.
As our Congress critters have demonstrated over and over and over, they love to spend our money on some of the most wasteful things imaginable.
For example, a total of $3 million has already been granted to researchers at the University of California at Irvine so that they can play video games such as World of Warcraft.
Something seems to happen to people who get elected to Congress. Almost all of them seem to develop an addiction to spending our hard-earned money.
Let us hope that something changes in that regard, because right now government debt is completely and totally out of control.
In fact, the U.S. national debt is currently increasing by approximately 4 billion dollars every single day.
In the end, if something is not done about all this debt it will destroy the entire U.S. financial system.
But our politicians just keep putting it off and putting it off.
Eventually we will reap what we have sown. Debt is a very cruel master, and nobody can run from it forever – not even the U.S. government.
This article was posted: Tuesday, February 15, 2011 at 5:50 am