The budget argument in our federal government continues. I get a kick out of the amount being argued over. The Republicans proposed a $60 billion budget reduction. It was voted down and the Democrats countered with a $10 billion budget reduction. At stake is the shutdown of the federal government. If a budget isn’t passed soon, the federal government will have to be shut down and certain employees will be sent home without pay.
The Democrats are banking on the Republicans being held responsible for the shutdown and thus being voted out in 2012. This occurred once before in the mid 90s and the Republicans took the heat for it. The Democrats are banking on this happening again.I still laugh at the situation. If the budget is passed, it is going to raise our debt ceiling by another $1 trillion. So we are arguing over $60 billion in order to raise our debt by $1 trillion. The $60 billion isn’t near enough either so why even argue over an amount that will have no impact on our economy. There will be no winners or losers in this argument as the amount being argued over will have no impact on us.
The real losers in this argument will be the American people, but they don’t really seem to care that much either. Wake me up when the government is considering trillions in reductions. And it needs to be with an s after the word trillion. One trillion isn’t near enough either.
I watch with amazement and amusement as the arguments at both the federal and state levels continue at where to cut spending. People are fighting hard to keep their share of the pie. If we are having this much problem cutting spending where we are required to, how can we expect the federal government to cut spending when they can continue to finance our debt.
The problems we have are multiple. Our debt is such that the government does not take in enough tax
dollars to simply pay the interest on our debt. And this is with very, very low interest rates. What happens if interest rates go up?
Already no one is willing to lend us the money. The Federal Reserve has become the largest
purchaser of Treasury Bills now, because no one else wants to lend us money. The Federal Reserve gets the money through the counterfeit operation (printing money). Without that option we would already be broke.
America has a deficit of $14 trillion. They have other debts that aren’t considered legal debts because we aren’t contractually obligated to pay for them. This includes Social Security, Medicare, Medicaid, Fannie Mae, and Freddie Mac. Adding these obligations in brings us another $70 trillion to $120
trillion we owe depending on whose figures you want to use.
We don’t bring in enough tax dollars to pay the interest on the $14 trillion. How are we going to
pay the other $70 trillion in obligations? What if we doubled our taxes?
Well first of all, we would probably have a whole lot of rich people leave the country. They
simply aren’t going to foot the bill for every one else. While doubling our taxes would give us enough
to pay our interest payments, it wouldn’t eliminate our deficit nor pay any of our off the book obligations. Any significant increase in interest rates would still leave us with the same
problem.
If we aren’t willing to reduce our expenditures, and it doesn’t appear that we are, then the only solution is to continue to counterfeit money and try and inflate our way out of this. However, it is going to take a lot of inflation to accomplish this. Be prepared.
The only other solution is to cut spending - drastically. As a country, it doesn’t appear we have the backbone to do that.
