The federal government's fiscal year begins October 1, and there's little reason to believe this year will be better than the last. Publicly held federal debt is forecast to increase from 56% of gross domestic product to 66% in 2010, driven by a budget deficit of $1.5 trillion in 2010. When debts owed to various government trust funds are included, our debt burden will reach nearly 100% of GDP in 2010. When unfunded liabilities of more than $100 trillion from Social Security, Medicare, and government employee pensions are included, our total debt is several times larger than GDP.
Contrary to what some have told us in the past, deficits and debts do matter, and at the levels these debts have been accumulating, they matter a lot. Excessive government debts eventually lead to higher interest rates, inflation, a reduction in private investment, and a higher percentage of tax dollars being used to pay off interest instead of funding programs or cutting taxes. In 2010, nearly $200 billion will be spent on interest payments, almost half of which will be going overseas. Interest payments are forecast to skyrocket to $829 billion by 2019.
So far, we've been able to avoid many of the consequences of excessive debts, but we are living not just on borrowed money but on borrowed time. Increases in the prices of precious metals and foreign currencies are an indication that many investors are already getting nervous and are beginning to hedge their bets against the dollar and the U.S. economy. If supply of government debt exceeds demand for government debt, interest rates will have to increase in order to attract buyers of government debt. High interest rates will slow economic growth.
In 2010, more than 60% of the federal budget is so-called mandatory spending that is on auto-pilot and does not even require appropriations by Congress. Any serious budget reform will have to eventually focus on entitlements such as Social Security, Medicare, and Medicaid which are the lion's share of mandatory spending. However, reforming these programs has proven difficult as the current health care debate demonstrates.
Attempts to reduce smaller discretionary programs have proven to be problematic as well. Notoriously wasteful programs such as mohair subsidies and the market access program continue to be funded every year. While large mandatory entitlement programs are considered too large or too politically dangerous to cut, numerous small and mid-size discretionary programs are unfortunately considered too small to worry about.
The federal government currently funds thousands of government programs, so many in fact that getting an exact number of government grants and programs is difficult. Many of these programs have existed for decades and have long outlived their usefulness, assuming they were ever useful in the first place. Congress needs to aggressively identify and terminate these programs.
Several weeks ago, I co-founded the Sunset Caucus. Members of our caucus have already identified programs to be sunsetted. Individually, these proposed cuts may not have a huge impact on the deficit. Collectively, these cuts will add up and, more importantly, will give Congress the courage and the ability to tackle the larger problem of entitlement spending. Obviously, cutting small and mid-size discretionary programs alone will not balance the budget, but Congress has to start somewhere.
Eric Schurenberg: What to Do About the Depressed Dollar
The strong consensus right now is that the dollar's skid will continue. But who knows? I wouldn't place any big bets against the dollar right now. Markets are great at confounding the majority opinion.
Larry Gellman: Back to the Future -- The Tension Over Tense
With investments, mob psychology takes over. People get greedy at the top and afraid at the bottom. At the end of the day, they almost always default in favor of sleeping at night.
Michael J. Wilson: Unemployment and the Manchester Index
tells us that the loss to the nation can't be measured simply by counting the number of unemployed people. We have to deal with the increasing length of unemployment and how it is addressed.
For example, these are the first of the "programs (that) have existed for decades and have long outlived their usefulness, assuming they were ever useful in the first place" which have previously been "too small to worry about" which "Congress needs to aggressively identify and terminate" that have been identified by the Sunset caucus to be eliminated:
The Economic Stimulus Package
The Presidential Election Fund
Americorps
The National Endowment for the Arts
Amtrak
The Nuclear Waste Fund
See, didn't your jaw drop to the floor again?
Your side has no credibility when it comes to deficit reduction. It's like listening to a temperance lecture by a blind drunk.
Of course you fail to address which party, and its policies and politicans, gave us the enormous national debt we are carrying. And which party and politicans first began sending US industry to low labor cost nations...no, it wasn't Bill Clinton; he merely sought "bipartisanship" by supporting Bush 1's "free" trade philosophy. Sending American business overseas ended two decades od earnings gains by the middle class.
No, Congressman, you may not have been a member of the conservative Congresses, a co-conspirator of conservative presidents who broke the economic back of this nation....but you joined that mob with your eyes open. Now you're crying in your beer about deficits when our current president is simply (whether doing in correctly or not) trying to repair what NIxon, Reagan, Bush 1, and Bush 1/2 have done to this country.
Try to understand, Congressman, it isn't social spending that's hurting the nation, it's conservative economic policies that have stunted America's economic growth. The percent of the federal budget that is social spending is simply a reflection of how America's economy is shrinking.
Another way to think about it, Congressman, social spending is the moral duty an industrialized nation owes to its people. We are not an agrarian nation where unemployed can turn to farming...thus die before they're old enough to retire.