"If you raise taxes on millionaires and billionaires, you'll do nothing to address the debt and the deficit. And the thing you might do is you might finally put this economy over another cliff"
Joe Walsh
I love history. History is something we can always learn from. As often as not, if you are paying attention, you will see history repeat itself. I think we about to see that happen again.
Shortly after the President was sworn into office in Jan of 2009, the economy was in tatters. It was going to take some major effort and elbow grease to put things back on a half way normal track. The country was focused on this and believed the President was also. Then out of the blue came Lillie Ledbetter and OmabaCare. The whole jobs and economy thing took a back seat. With the midterms of 2010, the people spoke once again - get busy with the economy. Nothing happened. The debt limit negotiation turned into a fiscal cliff and sequestration nightmare scheduled to appear at midnight, December 31, 2012. After the November elections, with a slim victory in hand, the President began a tepid negotiation with the Speaker on resolving the upcoming nightmare.
How is history repeating? To fully resolve our financial issues, we need major surgery on the tax code, entitlements and others. To do this the right way, it will take the better part of the second term. It needs to be priority #1, 2, 3 and 4. However, on the news this morning, Politico reported that shortly after the inauguration in January, the first priority will be immigration reform. Our financial fix will need to be lower priority. People can't seem to remember how we got here in the first place - it was called "kicking the can down the street". In addition, the vocabulary has become fuzzy. We understand how to soak the rich, but the other terms have been forgotten or redefined. It is for that purpose I need to give a vocabulary test.
Annual Deficit - This is the amount of money on a fiscal year basis, that we spend more that we take in for revenue. At our current rate of spending, this number could be as high as $1.7T in GFY 13.
National Debt - This the amount of aggregate deficits the country owes. As of today, the debt stands at $16.372T. Unless we are able to control our spending this fiscal year, it could be as high as $17.7T by Sept 30, 2013.
Unfunded Liabilities - This somewhat unreported number is very important, especially as we discuss entitlement reform. The liability of all federal programs, including the entitlements, is slightly over $100T. The number is calculated by taking the expected outlays for the next twenty years and comparing it the projected revenue coming in.
Unfunded Mandates - Every regulation, rule or statute coming out of Washington has some kind of cost. Some costs are very small, some are huge. Very few, if any of these regulations are accompanied by funding which will help offset these costs. As many of these which have hit the business community the past four years will seem small compared to what is expected in the next four years.
Interest - So far in the first two months of GFY 13, we have paid $38B in interest to service our debt. Every year when the total debt goes up, so does our interest expense. If we were not in the time of almost "free" money, the interest amount would be astronomical.
States - As more and more blue states teeter on bankruptcy, they will be looking to Washington for help - a bailout. Many of these are driven by underfunded pensions. This could be a huge number.
Unexpected - There are always the bumps in the road. For example, Super Storm Sandy already has a price tag of $60B which is being shoved towards the feds. Look for this number to grow.
Unknown - The 600 pound gorilla on this one is Obamacare. This could be the grand daddy of the new cost drivers.
Well that is it folks. Unfortunately, most reading this article already know these definitions. It is the "chattering class" in Washington that needs the lesson. So far, they have earned an "F" in this class.
Unfunded Liabilities - This somewhat unreported number is very important, especially as we discuss entitlement reform. The liability of all federal programs, including the entitlements, is slightly over $100T. The number is calculated by taking the expected outlays for the next twenty years and comparing it the projected revenue coming in.
Unfunded Mandates - Every regulation, rule or statute coming out of Washington has some kind of cost. Some costs are very small, some are huge. Very few, if any of these regulations are accompanied by funding which will help offset these costs. As many of these which have hit the business community the past four years will seem small compared to what is expected in the next four years.
Interest - So far in the first two months of GFY 13, we have paid $38B in interest to service our debt. Every year when the total debt goes up, so does our interest expense. If we were not in the time of almost "free" money, the interest amount would be astronomical.
States - As more and more blue states teeter on bankruptcy, they will be looking to Washington for help - a bailout. Many of these are driven by underfunded pensions. This could be a huge number.
Unexpected - There are always the bumps in the road. For example, Super Storm Sandy already has a price tag of $60B which is being shoved towards the feds. Look for this number to grow.
Unknown - The 600 pound gorilla on this one is Obamacare. This could be the grand daddy of the new cost drivers.
Well that is it folks. Unfortunately, most reading this article already know these definitions. It is the "chattering class" in Washington that needs the lesson. So far, they have earned an "F" in this class.
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