At the excellent econ blog Q&O, Dale Franks illustrates what should be obvious to even the most obtuse observer (which excludes all Democrats and Utopian Statists).
[In 2012 we] spent $ 3,795.55 billion, while taking in $ 2,469 billion in taxes and receipts. That gave us a deficit for the year of $ 1.326.55 billion.
Much of the spending is required by law. Mandatory spending includes Social Security, Medicare, Medicaid, and retirement benefits for the military and federal workers. In addition, interest on the national debt of $ 227.73 billion must also be paid, by law. Overall, $ 2543.51 billion in spending was legally required. That’s 67% of all federal spending.
Keen observers will note that revenues of $ 2,469 billion do not cover that amount of mandatory spending. So, we missed being able to pay for required spending alone by by $ 74.51 billion. Essentially, we borrowed money to pay one-third of the interest on the money we’ve already borrowed.
Actually, we’re pretty lucky when it comes to the whole interest payments deal, because the average interest rate on the debt is hovering at around 2%. Every additional percentage point in that interest rate translates to about $ 115 billion dollars in additional interest charges every year. If interest rates were to rise to the historical average of 6%, that would add about $ 575 billion per year to cost of servicing the debt. That would raise the annual debt service costs from $ 228 billion to $ 803 billion. That’s about $ 44 billion more than we currently pay for defense. So, let’s hope for a weak, struggling economy, right? Gotta keep those interest rates at historical lows.
Anyway, the remaining spending is all discretionary, so, we chose to spend another $ 1,252.53 billion in discretionary spending. $ 759.11 billion was spent on killing foreigners. Everything else the Federal Government does—all of the executive departments, science and medical research, the Judicial branch, and giving money to heathen foreigners to try and make them our friends—cost us $ 492.42 billion. Giving money to the heathen foreigners—also known as foreign aid—accounted for about $ 38 billion for the year, or 1% of federal spending.
So, what can we extrapolate about the future? Well, we know that, even in interest rates stay steady, mandatory spending on entitlements will rise as the huge population bolus that is the Baby Boom generation begin retiring. Without either significant new taxes and/or significant entitlement cuts, re. That means that, in the not-too-distant future, revenues will not cover even the cost of mandatory entitlement spending.
We can—and probably will—ameliorate this by slashing defense. It’s what the Europeans have done, after all…
Here’s the executive summary: the core function of the federal government — national security — will be sacrificed on the altar of redistributionist, Utopian fantasies.
The Chinese are creating a nuclear-capable Navy. The Iranians are practicing launches of EMP nuclear weapons. And Hezbollah is operating in the American southwest, thanks to the Democrats’ open borders policies.
All is going according to plan. That is, if you seek the destruction of the American Experiment.
Hat tip: BadBlue News.
Doug Ross @ Journal