Budget Debt
The US Government spends about $3.7T a year and generates revenues of about $2.5T a year. A $1.2T annual deficit in 2012. In the last two years, Sequestration cuts and increased revenues have reduced the deficit. Now that Obamacare is underway, forecasts skyrocket for budget deficits. If anyone wants to know why we have a budget problem in this country, all you have to do is look at the running debt clock. We are now at $17T in debt.! But, if big numbers alone don't get your attention, then lets put the $17T in perspective, it represents over 100% of GDP. The nation owed $10.6 trillion on Jan. 20, 2009, when President Obama was sworn in, and he has added another $5.4 trillion since – more than Bush piled up in two terms. There is bipartisan agreement that we cannot sustain this level of debt. There is also bipartisan agreement that we must correct the outflows exceeding inflows that drives the debt higher every second (see debt clock) . Everyone who manages a checkbook has seen this problem before and knows how to correct it - reduce expenses and increase income. Increasing revenues is critical to the solution, but will not have an immediate impact. Reducing expenses is also critical to the solution and can generate immediate impact. It is the only thing in your control instantly! Everything else we here about this subject beyond these two facts is just noise and should be ignored. The political left and right cannot agree on how to correct this problem. Doing something is also better than doing nothing, which is what this stalemate is giving us now. The left solution to our problem is to increase taxes on the rich to increase income. Currently the top 20% of income earners pays 80% of the federal tax burden. So do we want them to pay 100%? 110%? 120%? Maybe just write the check every year for the entire cost of government, whatever it is? Clearly this is not the solution. The right wants us to reduce spending and taxes, which is also a poor solution in a recessionary economy. But the truth is we must do both (reduce expenses and increase income), we must do it now and it will not be easy. All the political hot air outside these two facts is simply a distraction from the difficult but obvious answer. Europe is going through this right now and they are struggling mightily with the anticipated pain of the solution that in their hearts they know is necessary. To increase income we must immediately restructure the tax code to foster a growing economy. A growing economy will increase income (tax revenues for the government) over the next 10 years, but not immediately, this is a delayed impact. To immediately begin to impact our budget and debt problem whiling anticipating increased revenues we also must immediately and dramatically cut spending. That MUST include discretionary spending AND entitlements which represent 90% of the problem. The left will say you are hurting education, the homeless, healthcare of all Americans, the elderly and on and on. The right will shout "we are already taxed enough". All This whining MUST be ignored. No one wants to hurt themselves, their families or their neighbors We have no choice but to intelligently make these difficult decisions while minimizing the pain. But there will be pain. And our representatives MUST ACT NOW. It is a dereliction of duty if they do not. Below you can watch the ongoing debate on this critical issue. And hopefully see the solution we need develop.

Obama’s Debt Interest Bomb

from The Wall Street Journal,

Rising interest payments are already showing up in the federal fisc.

President Obama left his successor many time bombs—think chemical weapons in Syria and the collapsing Affordable Care Act. But a burning fuse that gets less attention showed its first signs of the explosion to come in Friday’s Congressional Budget Office budget review for March: Rising net interest payments on the national debt. CBO reported that the federal budget deficit rose $63 billion in the first half of fiscal 2017 (October-March) to $522 billion from a year earlier. But here’s the especially bad omen: Net interest payments rose $7 billion, or 30%, in March from a year earlier.

If that seems small, consider that interest payments rose $28 billion for the six months of fiscal 2017 to $152 billion. That’s a 22.2% increase, among the biggest in any single spending item highlighted by CBO. The increases reflect the growing debt but in particular the Federal Reserve’s decision to raise interest rates after years of near-zero rates. While Mr. Obama was doubling the national debt over eight years, the Fed’s monetary policies spared him from the fiscal consequences. The Fed’s near-zero policy kept interest rates at historic lows that reduced net interest payments even as the overall debt increased. The Fed’s bond-buying programs also earned money that the Fed turned over to Treasury each year, reducing the size of the federal budget deficit by tens of billions of dollars. This not-so-free Fed lunch is starting to end. CBO estimates that $160 billion more spending will be required each year over the next decade if interest rates are merely one percentage point higher than in its current projections. As interest rates rise, the Fed will also have to pay banks more to keep excess reserves parked at the central bank. After its latest rate increase in March, the Fed now pays banks 1% on reserve balances or about $20 billion a year, and that will go up. Fed officials are also now hinting that this year they may finally stop buying new securities when the current bonds on its balance sheet come due. This is necessary and long overdue, but it will mean smaller Fed contributions to the federal budget than the more than $90 billion the Fed has turned over in recent years.

All of this is set to explode on President Trump’s watch, and it will complicate the task for Republicans as they try to reform the tax code within tighter budget constraints.

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