The Thinker: Rich Galen

  
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Mullings by Rich Galen
An American Cyber-Column By Rich Galen
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Capitalism?

Rich Galen

Monday December 3, 2012

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  • With the Redskins playing the Monday night game and the National's still not having made a deal with their 1st baseman, Adam LaRoche, there's not much to think about here in Our Nation's Capital other than that pesky fiscal cliff.

  • Depending on what comes up in your Google search for "What will be the effect on GDP of the fiscal cliff" you get answers ranging from a drop of about 1.4 percent (NASDAQ) up to four percent (Washington Post).

  • Most of the guesses fall in the 3 - 3.5 percent range.

  • No matter how much the economy might contract as it free falls down the fiscal cliff, this much is true:
    We now have proof that the U.S. economy is totally - totally - dependent on federal government spending.

  • The sequestration piece of the cliff calls for spending cuts of $1.2 trillion over the next 8 years - an average of $150 billion per year.

  • According to the White House website, the first time the Federal government spent more than a billion dollars in a single year was in 1917 when we spent just under $2 billion having entered World War I in April of that year. The next two years of full-blown involvement saw spending of $31 billion to pay for the war.

  • Fifteen billion in 1917 dollars would be about $180 billion today. That's a far, far cry from the $3.8 trillion estimated for FY 2013 in which we currently reside. In fact it's just under five percent of this year's budget outlays.

  • In 1944 and 1945 - the two highest years for spending during World War II we averaged about $92.5 billion. In today's money that would be about $946 billion - still less than 25% of today's outlays.

    SIDEBAR

    To get this relative spending, I am using a site called www.measuringworth.com. The numbers I'm citing are using what is known as the GDP deflator. There are other measurements including commodity costs, income, and wealth.

    END SIDEBAR

  • The first time the Federal government spent a half trillion dollars was in 1979 ($504 billion) and the magic trillion dollar barrier was first crossed in 1987 at $1.007 trillion.

  • Just to tie a bow on all this spending we first spent $2 trillion in 2002 and hit the $3 trillion mark in 2009.

  • I understand that the world in 2012 (or 2013 in fiscal years) is a far, far cry from the world in 1917. And, I am not arguing that we return to the abject lack of any meaningful safety nets.

  • Getting back to the $150 billion a year in spending cuts under sequestration, they equal only about four percent of estimated outlays for FY 2013.

  • As we discussed in Friday's MULLINGS "(Five Percent") a relatively minor cut in Federal spending would not, depending upon how it's distributed, cripple the government.

  • President Obama's tax plan will, his team claims, raise $1.6 trillion in revenue for the Feds over 10 years. Even I am confident that I can do that arithmetic in my head: $160 billion a year.

  • Including 2013 that means additional income to the government of $800 billion over the next five years.

  • Problem is, the White House' own estimate show accumulated deficits of over $3.4 trillion or $680 billion a year (it is not a straight line as the budget calls for a deficit of $901 billion for this year alone).

  • Subtracting $800 million from $3.4 billion still leaves $2.6 trillion in accumulating national debt over the next five years.

  • Adding the sequester savings ($150 billion a year or $750 billion over five years) to the increased revenues we get $1.5 trillion.

  • We are still over $1 trillion short of even balancing income and expenditures, much less reducing the debt.

  • With all of these numbers bouncing around, I am absolutely certain I've made an error or two.

  • But, assuming I'm in the ballpark, all this talk about the fiscal cliff may be more income protection for the millions - hundreds of millions - of Americans who get money through aid, guarantees, working for, or selling things to, the federal government.

  • I hope I'm wrong, but it seems to me that we have long since erased most, if not all, remnants of capitalism from the American economic system; and it happened way before a guy named Barack Obama became President.

  • The nation will collapse if the Federal government doesn't continuously feed the economy.

  • Forever.

  • On the Secret Decoder Ring today: Links to a really good Q & A about the fiscal cliff and a link to the WH annual spending tables. Also another amusing Mullfoto from Great

    -- END --

    Copyright © 2012 Barrington Worldwide, LLC



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