For all the debate over spending and revenue, a few convenient facts seem to be ignored by most politicians and media. A simple graph shows the fundamental problem. Below the $0 on the upper graph is total federal spending by major category. You see a fairly dramatic and consistent increase in spending through 2016. The big problem is on the revenue side. You will notice a slight dip over the last few years as revenue peaked in 2008 and declined, as expected during the recession. The problem is the projection of revenues over the next few years. Does anyone really believe that revenue is going to increase by an average of 12% a year for the next 5 years? These revenue numbers assume the expiration of the Bush tax cuts and any additional tax increases passed as part of Obamacare, which in principle could increase tax revenue. But that much? We have been running trillion dollar+ deficits for a couple of years and the only reason those are forecast to go away is because of overly optimistic revenue increases. The fact is, revenue is not going to increase nearly that much because the economy is not recovering, and likely will not recover any time in the near future. Bottom line is, we will continue to run trillion dollar deficits for at least the next five years, taking our national debt from $14.3 trillion to upward of $20 trillion by 2016. Does anyone really believe that kind of debt is sustainable? If we are talking about a debt downgrade at $14.3 trillion, what sort of credit rating will we have at $20 trillion in a couple of years?
Congress is set to vote on a token spending reduction package so the debt level can increase. Baseline spending may get cut, but not anything significant that will slow down government spending. There are no real spending or budgeting reforms as part of the package. Somehow Washington DC thinks it continues to be business as usual and if they patch a few minor problems everything will work out. Bottom line: we are screwed and Congress and President Obama could care less. They continue to put their own political fortunes above that of the nation. Instead of fixing the problem now they kicked it down the road--where it will be even more difficult to fix.