The New CBO Budget Numbers Are In And The New CBO Budget Numbers Are Not Good
Article by Bruno Korschek
From a historical point of view, we are in the midst of three history making upheavals that will have long term impacts throughout the world, certainly interesting times. The first upheaval is the earthquake disaster in Japan and what the recovery time and costs will do to the world economy. Second, the quest for freedom in the Middle East and how this quest is likely to have both good and bad consequences for various parts of the world including the U.S. And finally, the financial integrity disintegration of the United States economy through the mismanagement of the country’s financial health by the political class.
This article concerns the last history making event, the financial destruction of the United States. The Associated Press reported on March 19, 2011 that a new evaluation of the Obama administration’s long term budget by the Congressional Budget office (CBO) revealed that we are much closer to our financial collapse than even the most pessimistic among us could have thought. Before going into the details of the article, let’s review where we know our national financial health is today:
– The Federal government national debt is around TRILLION and climbing rapidly.
– This debt places an average debt burden on each U.S. household of about 2,000.
– The February, 2011 monthly incremental debt was about 5 billion or about ,000 per household. In other words, in February, each American household was responsible for ,000 that the Federal government spent that it did not have the tax revenue to cover.
– In the past four years that the Democrats controlled Congress, the national debt rose over TRILLION.
Nasty, nasty stuff. However, now the CBO has released its latest estimates and they are not good:
– Obama’s original budget estimate called for an additional .2 TRILLION worth of debt over the next ten years or about ,000 per U.S.household.
– However, the CBO estimates that this is a very, very optimistic number based on some faulty assumptions and that the increase in the national debt is likely to be .3 TRILLION higher or .5 TRILLION.
– Thus, between the existing TRILLION and the additional .5 TRILLION debt that the Obama budget will incur, every U.S. household will be on the hook for about 4,000 of the national debt within ten years.
– This debt will be more than one and half times the size of one year’s gross domestic product. In other words, the country would have to work more than 18 months to pay off the debt and not spend any money on anything else including food, products, services, etc.
– The new CBO numbers estimate the Obama Care will also be billion more expensive than previously hyped by the administration, substantially reducing any positive budget effects from the legislation, one of its main selling points originally.
– The Obama administration estimates that the deficit will eventually be reduced to about 3% of the GDP number but the CBO disagrees, estimating that the deficit will never get below 4% of the GDP which would still make it unacceptably high.
– The difference in estimates between the CBO and the administration is that the CBO does not believe in the “rosy” assumptions in the President’s budget, it does not believe that the government will collect all of the increased tax dollars it assumed, it does not believe that the political class has the will power to reduce Medicare payments (which it has never had int he past), and there is no substantiation for “unspecified bipartisan financing,” all very legitimate disagreements to have with Obama’s budget.
– The White House does not dare disagree with the CBO estimates or methodology since it used the CBO estimates to sell in its own health care reform legislation. Thus, if they vilify these CBO budget numbers they nullify the Obama Care numbers.
– The situation has gotten so bad that 64 Senators, 32 from each political party, recently signed a bipartisan letter to Obama that called on him to take the lead in developing a strategic and comprehensive budget reduction plan along the lines of Obama’s own deficit reduction commission’s findings, the very commission that Obama commissioned and then almost completely ignored.
We are witnessing historical financial distress and the administration does not even acknowledge how bad the situation is by developing outrageous spending plans that add TRILLIONS to the deficit while ignoring its own commission that would help fix the problem. Both political parties, as witnessed by the Senators’ letters, realize that the problem needs urgent attention. Only the White House and the current resident seem to see no urgency in this area.
If they do not reverse their attitudes, take the lead, and make some bold and courageous moves, we are likely to end up like the economy of Ireland, whose status was reviewed in the March 11, 2011 issue of The Week Magazine. According to an article by Colin Barr of Fortune that was summarized in that issue of The Week:
– Ireland has imposed two years of painful austerity on its citizens for its mismanagement of the economy.
– As a result, wages are falling, unemployment has tripled to 13%, and younger Irish citizens are leaving the country in larger and larger numbers. Investors who are buying Irish government bonds are insisting on a return of at least 8%.
– This is what has happened in Greece, has happened in Ireland and other European countries who let their government spending get out of control. Economic hardship, as the interest on the piles of debt get higher and higher and standards of living get lower and lower. It is a fate that we face unless the President somehow does a turnaround and starts leading for once and stops touring other countries, stops playing golf so often, and stops being just a typical Chicago politician.
And it is not as if most of the heavy lifting has not already been done for him. His deficit reduction commission appears to have done a fine job and detailed analysis of how to get spending under control. The Cato Institute has gone through the current Federal government budget line by line and has identified hundreds of billions of dollars that could be pared from the Federal government without undue harm to ordinary Americans. Think tanks, both convservative and liberal, have done the same. All that is needed is a leader, not a politician, to lead the way.
A famous Chinese saying goes as follows: “May you live in interesting times.” On the surface this looks like a positive thought and intent, may you have an interesting journey through life. However, if you do a little research on the saying, it really is meant to be a curse and to be read as follows: “May you experience much upheaval and trouble in your life.” From Japan to the Middle East to the precarious financial situation our politicians have put us into, we are experiencing much upheaval and trouble, neither of which will enhance our individual freedom and liberty in the long run.
For as the government’s financial situation collapses, it will draw down/confiscate more and more wealth from its citizens in a desperate last attempt to prop up the financial system of the country which is buckling under over TRILLION worth of debt. When government gets into the confiscation game to cover its own incompetent bungling, you are no longer living in a free country. Interesting, and troubling, and sad, and as the CBO numbers illustrate, not good.
About the Author
Walter “Bruno” Korschek is the author of the book, “Love My Country, Loathe My Government – Fifty First Steps To Restoring Our Freedom and Destroying The American Poltiical Class,” which is available at http://www.loathemygovernment.com and online at Amazon and Barnes & Noble. Our daily dialog on freedom in American can be joined at http://www.loathemygovernment.blogspot.com