August 29, 2010

Nifty Notes on Nonsensible Spending

The government of the United States is digging ever deeper into your wallet.  Intuitively you know this, but here's some proof of out of control government spending.

Cost of Government Day
Cost of Government Day (COGD) falls 8 days later in 2010 than last year’s revised date of August 11. In 2010, the average American will have to work an additional 51 days out of the year to pay off his or her share of the cost of government compared to 2000, when COGD was June 29. [Source]
The national average is 231.6 days for the average worker to pay off his or her share of the cost of government.  That means 63.5% of of a worker's job effort goes to the government in some form or another.  Regardless of how you feel about the Bush Tax Cuts, that level of confiscatory government intrusion into the economy is the real unsustainable problem for the country.  It's like trying to drive a transport truck with the engine of 4 cylinder engine.  You are asking the engine to do too much.

 The worst states  [Source]  for COGD are California and Massachusetts (239.5 days each), Washington and Washington D.C.  (241.1 days each), Maryland (247.4 days), New York (253.8 days), New Jersey (257 days) and the worst offender Connecticut (260.1 days).  Notice they're all left leaning states, with the recent exception of  the election of New Jersey governor Chris Christie. It could be argued that those states are all populous states and therefore require more money to run, but because the number is an average, it means it is a per capita comparison.  Intuitively speaking,a larger state may have more expenses (e.g. more schools) BUT it also has a larger tax base and therefore should not need to tax proportionally more.  By comparison, Alaska is the lowest number for  COGD (209.4 days), and the more conservative, but also highly populous states of Florida and Texas both come in at 225.3 days. Credit goes to these leaner states, but to be fair even Alaska is eating 57.4% of its citizens income in obligations.

You don't want to become Sweden? News flash - you already are.

Government spending is the problem, not taxation 
Back in 1902 the government spent only six percent of our national income for public use. That was for everything: defense, education, the Post Office. Today in 2009 the government takes 44.7 percent of our nation’s product. [Source]
Click to enlarge.

Take a look at this graph.  There's a number of points of note.  Democrats love to point out that the Bush tax cuts wiped out the government surpluses of the Clinton years. While 2000 present a peak in government revenue up to that point in time, the number was an anomaly even then.  Those numbers were aided by the dot com bubble that as we all know, subsequently burst.  The Bush tax cuts clearly did have a short term revenue impact through 2002, but not as large as Democrats would have you believe .  Also worth noting is that the revenue curve rebounded starting in 2004 and was clearly back on the trend line by 2008.  The real problem with the government deficits and the now stunning amount of debt (permanently exacerbated by President Obama and the current Congress), is government spending.  Look at the blue trend line.  From 1994 through 2001 that upward curve was bent lower by the Republican Congress and the reforms they gave to President Clinton for signature into law.  Then, the  wars started and created a spending bubble.  While those spending items could not go on forever, they did hamper fiscal responsibility.  But look at 2009 and the estimate for 2010.  Even if the 2010 number is for spending is back to $3.1 trillion, that is a massive spending bubble.

The point is that on the normal trend lines the revenue and expenditures might not be ideal, but they were coming into line with each other.  That trend has been damaged and recovery is certainly not assured.

But that's not even the biggest problem.  This is.

Unfunded liabilities for health care, medicare, medicaid and social security are the real looming crisis.  There are no easy solutions to those problems, only difficult and painful solutions.  But the longer it takes to address those issues, the more painful the solution will be.

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