I am greatly encouraged by recent news regarding governmental spending, worldwide. This is because when catastrophe strikes, even the obtuse know what to do.
Outside Our Tent We Have . . .
Portugal gave up its battle to finance its current budget deficit today, on top of what debt it has, and will be asking for an 80-billion euro bailout. This follows similar collapses in Greece and Ireland.
Spain continues to deny that it will need help. However, siesta time has not yet ended on that part of the Iberian Peninsula; and who knows what will be discovered when the Spanish do finally awake.
Portugal’s news has caused great consternation in Germany’s government. Germany justifiably believes that its most successful economy in the euro-zone has been underwriting more than its fair share of the costs of these bailouts. However, such is the apparent lot of the wealthy in this world.
In Ring Number 1!!!
Meanwhile, in America, the disastrous consequences of our (mostly entitlement) spending are coming home to roost in a way that now can no longer be ignored. While the Democrats and Republicans try to make a big deal of the difference between $12 billion, $33 billion, and $61 billion in immediate federal spending cuts, the predictions of the current federal fiscal year deficit run as high as $1.5 TRILLION.
Yeah, you got it. The politicians are squabbling over amounts from 24 to 125 times less than the predicted revenue shortfall. It’s hard to imagine that these guys are smart enough to breathe, much less live. In order to remain sane, one only has to imagine that they dressed up as clowns and that all 535 of them managed to squeeze themselves into a 1967 Dodge Dart to go to their most recent budget conference.
Nevertheless, I find all this encouraging. There is nothing better than the fear of bankruptcy to bring a household, business, or country to its fiscal senses – just like there is nothing like a fire in a circus tent to bring all to look for the nearest exit.
In Ring Number 2!!!
The House Budget Chairman, Paul Ryan, seems to be someone who may understand, at least partially, what lies ahead if something isn’t done.
He has proposed $6.2 trillion in federal spending cuts over the next decade.
In what may be only coincidence, he happens to represent a district in Wisconsin. This is the State where the budget balancing battle has produced two armies: one which wants to cut wasteful, ineffective, and uncontrollable spending and one which wants to preserve a beautiful society by taxing the hell out of the undeservedly wealthy.
His plan presumes that President Barack Obama’s health care law will be repealed. Over the next decade, that would cut $1.4 trillion in spending alone.
Over this same period, he also wants to cut $389 billion from Medicare spending, $735 billion from Medicaid spending, and $932 billion from other discretionary domestic programs.
Nevertheless, Ryan’s plan still contemplates raising the national debt. In this same 10-year period, his plan predicts $40 trillion in federal spending but only $34.9 trillion in revenues.
In fact, Ryan’s proposal does not contemplate balancing the federal budget until 2030. Hence, the only way for government to keep operating without tax increases under his plan would be to keep raising the debt ceiling until that year.
Ryan’s plan also preserves Medicare benefits for current beneficiaries. This delays what could be significant cost savings to the federal government for decades. Further, Ryan’s plan also calls for a large reduction in the rate associated with the highest personal income tax bracket.
Keep Your Eye On Our Main Attraction!!!
What must be obvious to the casual observer is that two rings under the political circus tent have shows in them today. One features more clowns than the other; but both are largely divorced from reality.
The third ring is silent and unlit for the moment. This will be where the main attraction is presented. Let's hope the lights go on there much sooner than later.