It Is Not a Political Problem, It’s a Mathematical One

This article was from Simon Black, the Senior Editor at SovereignMan.com:

Everyone seems fixated on this belief that it actually mattered who won the election for President of the United States…and whether either of the two guys running were going to ‘fix’ everything.

The fact is, it doesn’t matter who won. Not one bit. And I’ll show you mathematically:

When the US federal government spends money, expenses are officially categorized in three different ways.

Discretionary spending includes nearly everything we think of related to government– the US military, Air Force One, the Department of Homeland Security, TSA agents, etc.

Mandatory spending includes entitlements like Medicare, Social Security, VA benefits, etc. which are REQUIRED by law to be paid.

The final category is interest on the debt. It is non-negotiable.

Mandatory spending and debt interest go out the door automatically.It’s like having your mortgage payment auto-drafted from your bank account– Congress doesn’t even see the money, it’s automatically deducted.

With the rise of baby boomer entitlements and steady increase in overall debt levels, mandatory spending and interest payments have exploded in recent years. In fact, the Congressional Budget Office predicted in 2010 that the US government’s TOTAL revenue would be exceeded by mandatory spending and interest expense within 15-years.

That’s a scary thought. Exceptit happened the very next year!

In Fiscal Year 2011, the federal government collected $2.303 trillion in tax revenue. Interest on the debt that year totaled $454.4 billion, and mandatory spending totaled $2,025 billion. In sum, mandatory spending plus debt interest totaled $2.479 trillion… exceeding total revenue by $176.4 billion.

For Fiscal Year 2012 which just recently ended, that shortfall increased 43% to $251.8 billion.

In other words, they could cut the entirety of the Federal Government’s discretionary budget– no more military, SEC, FBI, EPA, TSA, DHS, IRS, etc.– and they would still be in the hole by a quarter of a trillion dollars.

Raising taxes won’t help. Since the end of World War II, tax receipts in the US have averaged 17.7% of GDP in a very tight range. The low has been 14.4% of GDP, and the high has been 20.6% of GDP.

During that period, however, tax rates have been all over the board. Individual rates have ranged from 10% to 91%. Corporate rates from 15% to 53%. Gift taxes, estate taxes, etc. have all varied. And yet, total tax revenue has stayed nearly constant at 17.7% of GDP.

It doesn’t matter how much they increase tax rates– they won’t collect any more money.

GDP growth prospects are tepid at best. Facing so many headwinds like quickening inflation, an enormous debt load, and debilitating regulatory burdens, the US economy is barely keeping pace with population growth.

The only thing registering any meaningful growth in the US is the national debt. It took over 200 years for the US government to accumulate its first trillion dollars in debt. It took just 286 days to accumulate the most recent trillion (from $15 trillion to $16 trillion).

In October of this year alone, the first full month of Fiscal Year 2013, the US government accumulated nearly $200 billion in new debt– 20% of the way to a fresh trillion in just 31 days.

Not to mention, the numbers will only continue to get worse. 10,000 people each day begin receiving mandatory entitlements. Fewer people remain behind to pay into the system. The debt keeps rising, and interest payments will continue rising.

Curiously, a series of polls taken by ABC News/Washington Post and NBC News/Wall Street Journal show that while 80% of Americans are concerned about the debt, roughly the same amount (78%) oppose cutbacks to mandatory entitlements like Medicare.

Bottom line, the US government is legally bound to spend more money on mandatory entitlements and interest than it can raise in tax revenue. It won’t make a difference how high they raise taxes, or even if they cut everything else that remains in government as we know it.

This is not a political problem, it’s a mathematical one. Facts are facts, no matter how uncomfortable they may be. The election was merely a choice of who is going to captain the sinking Titanic.

Federal Government Borrows 46 Cents For Every Dollar It Spends

While President Obama is out campaigning for higher taxes on the rich, which won’t do anything to bring down the national debt, the government is piling on the debt debt by borrowing 46 cents for every dollar it spends.

The federal government borrowed 46 cents of every dollar it has spent so far in fiscal year 2013, which began Oct. 1, according to the latest data the Congressional Budget Office released Friday.

The government notched a $172 billion deficit in November, and is already nearly $300 billion in the hole through the first two months of fiscal year 2013, underscoring just how deep the government’s budget problems are as lawmakers try to negotiate a year-end deal to avoid a budgetary “fiscal cliff.”

Higher spending on mandatory items such as Social Security, Medicare and interest on the debt led the way in boosting spending compared with the previous year, which also highlights the trouble spots Congress and President Obama are struggling to grapple with.

German Finance Minister Says ‘Great Uncertainty’ About US Debt

German Finance Minister Wolfgang Schaeuble

German Finance Minister Wolfgang Schaeuble questioned on Tuesday how the United States could deal with its high levels of government debt after November’s presidential election.

In a speech to the Bundestag lower house of parliament to open a debate on the 2013 German budget, Schaeuble said worries about U.S. debt were a burden for the global economy, hitting back at Washington which has criticized Europe for failing to get a grip on its own debt crisis.

In private, German officials often express concern about U.S. debt levels and the inability of American politicians to reach a consensus on how to reduce it, but Schaeuble’s public remarks underscore the extent of the worries in Germany.

“Ahead of the election in the United States there is great uncertainty about the course American politics will take in dealing the U.S. government’s debts, which are much too high,” Schaeuble said. “We need to remind ourselves of that sometimes and the global economy knows that and is burdened by it.”

A weak economy and political gridlock in Washington have prevented meaningful debt reduction in the United States, and with three weeks still to go in the fiscal year, the federal government already has notched its fourth straight trillion-dollar deficit, according to the Congressional Budget Office.

German Chancellor Angela Merkel has established a close relationship with Obama and they are of one mind on many foreign policy issues, but members of her conservative party have welcomed the Romney campaign’s focus on debt reduction.