Debt Shark Week
Since The Free Agent was wee, one measure of the difference between a pessimist and an optimist was when each thought Social Security would go bankrupt. (The FA has a contemporary who started working at the Social Security Administration out of college and successfully surfed that wave into pensioned retirement.) Being an optimist, The FA hoped it would happen soon, so we could rationalize the way we cope with extended lifespans. Alas, she underestimated the duplicity and irresponsibility of the ruling political class who, even in the current debt crisis, keep kicking that can further down the road.
Mister Obama, who has wisely adopted The Free Agent’s household budget analogy, says that National Dad must pay more in taxes to solve the debt crisis, yet he and Congress attack spending with all their might and come away with cuts the thickness of gold leaf. These Cuts Which Must Not Be Named, according to the president, will save a trillion dollars over ten years. That sounds like a lot, until we put it into fed math. The current federal budget is $3.7 trillion (84% of which is flat-out transfer of money from You to Not You, by the way). Expected revenue is $2.6 trillion, so cutting a tenth of a trillion out of the budget reduces the budget deficit from $1.1 trillion to $1 trillion. The fed is still a Debt Shark that must keep borrowing or die. The Free Agent sees only one sensible option between those two, but of course, congress and the president saw another.
The US median household income is $50,233. If National Dad ran his affairs like Washington, he’d be $282000 in debt, spending $71,485 a year, and think that shaving $1,932 off that—37 bucks a week—would somehow get him out of the hole.
In addition to being so bad at math he had to attend law school, Mister Obama seems to forget that National Dad produces all the goods and services in the country.
Let’s say he owns a bakery with ten employees. National Dad looks “rich”, so Mister Obama would like him to move some retained earnings into tax liability. When the new taxes are paid, the bakery’s assets decrease by that amount. This has consequences for the bakery. Those consequences will not be expansion. Perhaps the bakery can now only pay for eight employees. (Who then sue National Dad for infringement on their right to not work so hard.) The federal government, which used to receive, say 150% of a baker’s income from National Dad’s employees (its largest source of income) will now receive 20% less. So the money taken from National Dad could easily result not only in no additional income for Debt Shark, but more unemployed to wring its fins over.
Using no more advanced math than National Dad would employ as he hands National Kid his allowance, The Free Agent lists the rails that must be touched if Debt Shark is ever to be electrocuted:
- Medicare/Medicaid—income transfer to subsidize health care for the poor. And anyone over 65. ($827 billion)
- Social Security—money you thought was being saved for you but was actually spent the day it was taken ($717 billion)
- DOD and Wars—national defense and other adventures, such as support for the Roundheads (or is it Cavaliers?) in Libya ($704 billion)
- “Income Security”—A potpourri of federal welfare programs like social security disability, Earned Income Tax Credit, and child support enforcement (really?) ($419 billion)
Those are the four biggest federal budget items. The next two are debt service and federal pensions ($215 billion each). These six categories account for $3.1 trillion of the $3.7 trillion federal budget. Cutting every other cent–$600 billion–would not balance the budget.
The Free Agent and National Dad are still optimistic enough to believe Americans can understand the math—even if politicians prefer to keep stubbing their toes kicking the same cans.