The $15 Trillion Super Circus
The day has arrived. Our total debt has surpassed $15 trillion. At the close of business on Wednesday, the debt stood at $15.033 trillion, and is on the cusp of overtaking our GDP. Overall, the federal debt has risen $4.41 trillion (41.5%) since Obama took office and $6.36 trillion (73%) since the Democrats took control of Congress in 2007. Our GDP has grown by only $1.3 trillion during Obama’s presidency. Pick your adjective of choice to describe this calamity: unparalleled, unprecedented, uncharted. No word can begin to describe the destruction that Obama has wrought on our republic.
Over the next few days, you will read many factoids and statistics about the federal debt, but here is one acerbic point you may miss. Ninety-one percent of Obama’s $4.41 trillion legacy of debt comes from the debt held by the public.
You see, the national debt consists of two components; debt held by the public and intra-government debt. The debt held by the public is the sum of the treasury securities held by those outside the federal government, with the lion’s share owned by foreign countries. The debt held by the public currently stands at $10.31 trillion. The other component, the intra-governmental share, is owed to other federal agencies and accounts, most prominently, the non-existent Social Security Trust Fund, as well as accounts holding pensions for military veterans and government workers. That share of the debt currently stands at $4.71 trillion. Overall, Obama has increased the public share of the debt by $4 trillion (63%), more than Bush ever ‘accomplished’ in his entire eight year presidency.
It is through this dour prism that we must view just how vacuous is the current debate over the budget. The prevailing narrative is that the entire supercommittee enmeshment is the result of the inter-party (and intra-party) debate over tax hikes. The glaring reality is this: IT’S THE SPENDING, STUPID.
Republicans and conservatives can agree to enormous tax hikes from now until next year, but we still will not have a true compromise – a balanced approach. This is because the Budget Control Act and the supercommittee don’t plan to cut one cent of spending. The entirety of the $917 billion ten-year discretionary savings comes from reductions to the prodigal baseline. We will never cut one penny from current spending levels. In fact, not only did we lock in the aforementioned unparalleled spending rates, we committed ourselves to add over $800 billion more in deficit spending. In other words, we are applying plastic breaks to a high-speed porkulous rail.
Moreover, the supercommitte plans to leave the other 65% of the budget, the mandatory spending, virtually untouched. There will be no prudent reforms of Social Security and Medicare, and the $950 billion in mandatory welfare spending will go untouched. Worse, Republicans are about to approve an Agriculture spending bill that raises spending on Food Stamps to an unfathomable $80.4 billion, double its funding level from just three years ago.
Outside conservative groups are often impugned as ‘intransigent’ bomb-throwers, unwilling and unable to compromise. The stone-cold truth is that most of us would be willing to make some painful concessions on the revenue side, in the event that Republicans would fight for real reductions in government programs and departments. That would be an authentic compromise; that would embody a true balanced approach. Instead, Republican leaders are on the cusp of approving an ‘Israeli-Palestinian style compromise’, aka an unmitigated capitulation.
What you won’t hear coming out of this bipartisan concession super duper committee is that we cannot possibly raise enough revenue from tax increases to cover the deficits. The top 1% already pays 36.7% of federal income taxes, even though they only earned 16.9% of all income. The recession has reduced their adjusted gross income from $2 trillion in 2007 to $1.3 trillion in 2009. Will tax hikes really offer them incentives to earn more money? While we might gain some revenue in the short-term, we will lose the golden goose in the long-run. Either way, we will never recover enough revenue to deal with the perennial trillion dollar deficits, the unfunded liabilities from entitlements, and the burgeoning growth in future interest payments.
We’ve been in this situation a number of times this year, and sadly, we will continue this tortuous cycle of submission to those who are mortgaging off our future. Must we breach the $20 trillion milestone before we wake up?