Tuesday, November 24, 2009

Why Obama’s Agenda Must Be Defeated

Yes, I’m going to channel my inner Rush and say that I want President Barack Obama (D-USA) to fail.

I’ll go farther. It’s vital for the future of this country that he fail.

I’m going to talk about numbers and dollars. And you don’t need to be a Nobel Laureate like Paul Krugman to understand. I’m going to lay it out in an airtight argument that a 12 year old could understand. I may even try it out on my six year old.

Ok, here goes.

This country is on a fiscal path that is unsustainable. The United States is responsible for over one-fifth of the world’s debt. Our debt currently makes up over 60% of our annual GDP.  By 2019, it’s expected to exceed 80% of our annual GDP. And you can look at the pictures I’ve linked to before here. The curve isn’t getting any better by 2019, so this number is only going to continue to rise.

By 2019, the projected annual interest on the debt is over three-quarters of a trillion dollars! Remember that the largest deficit for a single year prior to this one was less than five hundred billion dollars.

But wait. It gets worse.

These projections don’t include ObamaCare and Cap-and-Trade. They don’t include estimates for the unexpected, i.e., another war in the Middle East, or another Katrina, or another recession. They assume low interest rates will continue forever. Every day we hear about another state or city that may go bankrupt. As much as I, as a fiscal conservative, don’t like the idea, I must face reality. The likelihood that the federal government will decide to bail out one more or more of these states or cities is high. The likelihood of another GM bailout is high. We’re talking about another stimulus package for this recession. There’s a very real possibility of an FHA bailout, which could cost in the trillions of dollars.

In other words, this 80% number is a best case scenario. The betting man would bet on a figure much worse.

And, there’s no indication at all that it’s going to get better after 2019. At what point does the debt burden become crushing? I don’t know. But I don’t want to find out either. Continuing on in this manner guarantees that we’ll find out at some point. Hopefully later, not sooner, but I wouldn’t bet on it.

We had a debt bigger than this right after WWII. But then we had options. We decreased our huge military spending. Defense spending is a pretty small part of the budget now, and projected to get even smaller. In fact, that $774B number for interest on the debt in 2019, accounts for 84% of the projected deficit. The only way we’re going to reduce that interest number is to reduce the debt itself.

So the problem is the debt-to-GDP ratio. There are exactly four ways to reduce it. I suspect that we’ll have to do at least two of them.

1) Grow the economy

2) Cut spending

3) Increase taxes

4) Print money

I’m no Nobel Laureate, but if there’s another way, I sure don’t know about it.

Let’s assume that we’re not going to buy our way out of this by printing obscene amounts of money. You get double and triple digit inflation that way and destroy the economy. Generally, that’s a last resort. And usually fails in any event.

So, looking at the other three in turn.

1) Grow the economy – This helps two ways. It increases GDP, and also increases tax receipts, which would lower the debt. However, the CBO estimates weak to average economic growth over the next 10 years, in the 2-3% annual range. Cap-and-trade and ObamaCare will likely make this worse, not better. Unless Obama has some magic as yet unrevealed plan to grow the economy, this doesn’t appear to be the way out.

2) Cut spending – Remember how I started this? Saying I want Obama to fail? Everything he wants to do as part of his domestic agenda will increase spending. Every. Single. Thing. And the spending increases get worse after 2019.

3) Increase taxes – Ugh. I hate this one. And you have to be careful whenever you increase taxes, because it’s likely going to make it harder to 1) Grow the economy. But we’re probably going to have to do it anyway. Unfortunately, the Democrats already plan on massive tax increases to make their domestic agenda appear feasible. We won’t be able to afford to make the necessary tax increases once the Democrats have already increased them to pay for Obama’s agenda. Note that I could’ve called this one “Increase tax receipts”, which can occur by actually lowering taxes. But nothing on the Obama agenda is going to make it more likely to increase tax receipts by lowering taxes, nor does it appear even remotely possible that he’d even consider such a thing as supply-side economics.

So, in summary, Obama’s agenda will prevent us from being able to solve the debt-to-GDP problem by any of the available means. Therefore his agenda must be defeated. The Democrats must be stopped. It is vital for the future of the country that they fail.

Tell me where I missed something. I dare you.

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