Saturday, April 16, 2011

The Day Of Reckoning Is Coming

This post is primarily directed at more liberal readers, but whatever your stripe, hopefully there’s something here for you.

We are fast approaching the day of reckoning for our country. Everyone, Democrats and Republicans alike says that the growth of our debt is unsustainable. Every economist says so.

At some point then, our debt will become overwhelming. When that happens, our economy and our lifestyles will suffer catastrophic consequences. And the government won’t be able to help. There’ll be no food stamps, no unemployment checks, no Medicare, no Medicaid, no Social Security, no welfare of any kind.

A popular phrase in Washington, D.C. these days is “we can’t continue to kick the can down the road.” I’ve heard President Barack Obama (D-USA) say it. I’ve heard Congressman Paul Ryan (R-WI-01) say it. That may not be completely true. We might be able to kick the can down the road another ten years or so. We might even be able to put off the crisis for a few years (not ten, though, less than that) while doing so.

So, what we do as a people, and what our government does, over the next ten years may well decide the future of this country as an independent nation. We are facing the largest obstacle to our future since the Civil War. Yes, it’s that big.

Look at this chart. It’s about a year old, but still accurate enough for our purposes.

This chart is pretty optimistic, actually. I’ve seen scarier ones, but it’s good enough.

The good news is that it probably won’t actually be that bad. We probably won’t ever hit 600% of GDP, because the country will self-destruct long before then. Somewhere between 2030 and 2050, our economy will completely melt down.

Here’s a look at projected tax revenue vs. entitlement spending. This is from the CBO.

There’s no doubt about it. President Lyndon B. Johnson’s “Great Society” is bankrupting this country.

But what about defense? We spend way too much there. Surely that’s a bigger problem, right?

Wrong.

Notice that dark blue area at the bottom. That’s defense. The green area and everything above it is entitlements and interest. Interest growth is even worse than entitlement growth. Of course, the interest growth is due to entitlement growth.

So, that’s where we’re going. And it’s ugly. As I’ve been saying a lot lately, this isn’t politics. It’s math. You can argue with politics all you want, but you’ll find it much harder to argue with math.

You don’t like the Ryan plan. I get it. Fine. Then what’s your alternative?

Not the President’s vague outline from the other day, I hope.

The President’s plan does exactly what I mentioned earlier. It kicks the can down the road for another ten years. And buys us maybe 5-8 years, if we’re lucky, on the impending crisis. It does nothing about the major cost factor in our spending growth, and assumes tax revenues at much higher levels than we’ve ever had.

Let’s chalk his plan down as “unserious” then, and move on.

I ask again, what’s your alternative?

Well, we could totally eliminate the military. Libs hate the military.  Well, there’s that graph again.

Looks like we could maybe save a decade or so by eliminating the military. That might be enough time, actually. After that, you won’t care about your entitlement programs because you’ll be too busy learning to speak Chinese.

Let’s mark that idea down as “unserious” and move on.

Let’s tax the heck out of the rich. That’s what Michael Moore says we should do.

But as Mary Katherine Ham points out:

The grand total of the combined net worth of every single one of America’s billionaires is roughly $1.3 trillion. It does indeed sound like a “ton of cash” until one considers that the 2011 deficit alone is $1.6 trillion. So, if the government were to simply confiscate the entire net worth of all of America’s billionaires, we’d still be $300 billion short of making up this year’s deficit.

But, that’s just billionaires, and it’s net worth. We’re talking about taxing income. Let’s look at everyone.

  1. Tax the profits of the entire Fortune 500 at 100%. $391B
  2. Tax 100% of all income over $250,000 for everyone in America. $1.412T

Not even $2T. You’ve covered the deficit for less than a year and a half, and in the process you’ve destroyed the economy.

Of course, you wouldn’t actually go to those extremes, would you? You’d just do part of that. Congratulations, you’ve just returned to the President’s plan which we already decided was “unserious”.

And even if it could work, there’s still a problem. When you increase taxes on big corporations, they tend to move elsewhere. Ask San Francisco about Twitter. Or ask Illinois about Caterpillar. Or New York about Rush Limbaugh. And it’s not just businesses that do that. Those billionaires you want to tax? They have enough money to move elsewhere. And they will.

And, as was mentioned in the link above, what happens then is the well runs dry. Higher taxation is a short term solution. We have a long term problem. All you’ve done is kicked the can down the road a bit.

Let’s mark that idea down as “unserious” too.

I realized that I forgot to compare “The People’s Budget”. So, let’s take a look at that, shall we?

The progressives create impossibly high tax rates, and while they claim to balance the budget in 2021 (it is very hard to confirm their numbers), they almost certainly won’t after that.

[…]

Mimicking President Obama, their plan would retain the Bush-era tax rates and some tax credits for those making less than $200,000 ($250,000 for joint filers). In addition, it would protect middle-income families from the Alternative Minimum Tax for another decade.

Beyond that, the tax increases in this plan are breathtaking. It would restore pre-2001 income tax rates for those making between $200,000 and $1 million and create five new brackets for higher earners, topping out at 49 percent for those making $1 billion or more. Capital gains and dividends would be taxed at ordinary income rates for those making $1 million or more (up to 49 percent). It would also cap the value of itemized deductions for high-income taxpayers at 28 percent (another Obama idea), raise Social Security payroll taxes for both workers and employers, and raise the gas tax by 25 percent. There’s more, but you get the drift.

Ah, so a pretend budget. I’d like to see some CBO scoring, but they create burdensome taxes and appear to make it look like they are doing something for the first ten years. They don’t address the growth of entitlements, so like the previous taxation based plans, all they do is kick the can down the road. They should call it “The Taxing the Heck Out of the People Budget”. It would be more accurate, because this budget is about as un-people friendly as you can get.

Unserious.

To review, we’ve discarded:

  • Paul Ryan’s Plan
  • The President’s Plan
  • The People’s Budget
  • Defunding the Military
  • Taxing the heck out of the rich

Hmm. I ask again, what’s your alternative?

There is none. There is no way out of this situation without entitlement reform.

Period. Anyone who says otherwise is lying. Yes, I’m talking to you, Mr. President, and you, Senate Majority Leader Harry Reid (D-NV).

At the risk of repeating myself again, math trumps politics.

You may hate the Ryan plan. But at least it faces reality. If you don’t like it, come up with your own, but if it doesn’t include entitlement reform, all you’re doing is wasting your time and everyone else’s.

And we don’t have any more time to waste.

UPDATED: Included some information on “The People’s Budget”

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