How quaint – US Speaker Johnson works out a deal that reduces spending by 16 billion dollars above those agree last June – the debt clock stands at 34 trillion and 16 billion dollars
The US (and the western world) is drowning in the debt from decades of socialism and war-mongering.
From here:
Speaker Johnson announces spending deal to avert shutdown | Just The News
"As has been widely reported, a list of extra-statutory adjustments was agreed upon by negotiators last summer. The agreement today achieves key modifications to the June framework that will secure more than $16 billion in additional spending cuts to offset the discretionary spending levels," Johnson wrote.
The deal also "results in an overall $30 billion total reduction from the Senate’s spending plans," Johnson said.”
If approved by the House and Senate the deal will run all the way through to the end of the fiscal year on 30 September 2024.
Meanwhile, back in the real world where the reckoning for past fiscal management exists:
)U.S. National Debt Clock : Real Time (usdebtclock.org)
The estimate for the fiscal deficit for the year to 30 September 2024 is estimated to be 1.8 trillion bucks in the squatting White House Residents March 2023 statement.
Which reviews this 184 page document:
budget_fy2024.pdf (whitehouse.gov)
“The deficit would rise from $1.4 trillion (5.5 percent of GDP) in FY 2022 to $1.6 trillion (6.0 percent of GDP) in 2023 and to $1.8 trillion (6.8 percent of GDP) in 2024. The deficit would hit a low of $1.5 trillion (4.9 percent of GDP) in 2027 before rising to $2.0 trillion (5.1 percent of GDP) by 2033.”
“Between 2024 and 2033, spending would total $82.2 trillion (24.8 percent of GDP), revenue would total $65.2 trillion (19.7 percent of GDP), and budget deficits would total $17.1 trillion (5.1 percent of GDP).”
Five per cent annual deficits means that the a number doubles in 14 years (rule of 72 = 72/4).
This is the mentality of big government. As long as you can put it in a sentence, everything is just fine, no matter what the sentence actually means.
“More specifically, spending under the budget would decline from 25.1 percent of GDP in FY 2022 to 24.2 of GDP in 2023, before rising to 25.2 percent of GDP by 2033. Revenue – which spiked at 19.6 percent of GDP in 2022 due to high inflation and large capital gains realizations – would fall to 18.2 percent of GDP in 2023 before rising to 20.1 percent of GDP by 2033.
Taking the numbers 1.6 trillion equalling 6% of GDP in 2023, you get GDP of 26.67 trillion, taking 1.8 trillion and 6.8% of GDP for 2024 you get GDP of 26.47 trillion bucks – a reduction in GDP of 200 billion.
See that, the White House numbers imply a REDUCTION in GDP. Not growth, a contraction.
Here is a mid-session review of 2024, released in July 28 2023:
msr_fy2024.pdf (whitehouse.gov)
“From page 21 of 62 in pdf form we have this statement:
“Outlays for 2023 in the Mid-Session Review (MSR) are estimated to be $6,130 billion, $242 billion below the 2024 Budget estimate.”
Got that? 2023 outlays were below the 2024 estimate. In the real world, this statement would read “Outlays for 2023 are estimated to be 242 billion bucks higher than those of 2023” – see how “Newspeak” works?
There are many agencies estimating fiscal numbers. For a little perspective, here’s an earlier estimate from July 2021 lifted from the Congressional Budget Office for the discal position in 2024
Deficit Projections | Covid Money Tracker
“CBO estimates the budget deficit will total $3.0 trillion this year, fall to $1.2 trillion in FY 2022 and to $753 billion in 2024 as COVID relief winds down and the economy recovers, and then rise gradually to $1.9 trillion by 2031.”
See that number of 753 billion bucks for 2024? Compare that to the 1.8 trillion from the squatters March 2023 estimate. A trillion here a trillion there and pretty soon you have a major screw-up!
There would be little problem with quality federal spending that made things better. Most of it doesn’t – education and health standards are not the best in the world by any stretch. Neither is housing assistance for the poor – which gets to the middle classes rather than the poor (policy FAIL).
National debt of 34 trillion compared to GDP of around 26.5 trillion bucks represents a Dent to GDP ration of 128%. The US is not alone – the EU is in the same boat and Japan is far worse. An international comparison is not helpful. Do you celebrate your house burning down because everyone else’s house is also burning down?
That debt represents decades of bad fiscal policy – too much spending and not enough revenue.
Reinhards and Rogoff noted that countries with a debt to GDP of over 90% are in economic stagnation and decline.
The Reinhart-Rogoff error – or how not to Excel at economics (theconversation.com)
“Reinhart and Rogoff’s work showed average real economic growth slows (a 0.1% decline) when a country’s debt rises to more than 90% of gross domestic product (GDP) – and this 90% figure was employed repeatedly in political arguments over high-profile austerity measures.”
Austerity = paying back what you borrowed – that is, not stealing.
It is easy to see why. 34 trillion bucks of debt costs a trillion bucks a year at 3% interest rates. It costs 1.7 trillion bucks at 5%.
The entire budget for the military is under 900 billion.
“It includes $886 billion for defense and $704 for nondefense spending, Johnson said in the letter.”
The interest Americans pay on debt goes to others who may or may not use it for similar martial purposes. The point is, those others have the choice to spend the interest as they will – those paying the interest do not.
In order to get to a place where interest is not a burden on all future generations, the debt to GDOP ratio needs to return to something like 40-60% - fast – say ten years.
This means that fiscal surpluses of around 8% of GDP need to run for a decade. To do this, some combination of tax increases and spending reductions needs to occur.
Note that’s 8% of GDP, not 8% of taxes or spending. 8% of GDP = 2 trillion bucks.
To get to surpluses of 2 trillion bucks a year,
if spending is held constant, taxes must go up from around 4 trillion to 8 trillion.
A doubling of taxes.
If taxes are held constant, spending must be cut from 6 trillion to 2 trillion.
A 67% cut in spending.
Of course, the pain could be shared between taxes and spending. Say two trillion each to get the numbers to generate a 2 trillion dollar surplus.
Taxes up 2 trillion to 6 trillion and spending down 2 trillion to 4 trillion.
I can hear the scoffing at these sorts of changes from here! I would point out that the solution corrects the problems in a decade rather than the multiple decades over which the problem evolved from “socialist” defence, housing, health, education and welfare policies.
The longer the time taken to restore debt to GDP to around an affordable 40-60% of HDP from almost 130% of GDP, the more the US will decline into third world status.
Onwards!
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The bubble is going to burst, economically and financially and when it does people will die from starvation and lack of funds to survive. I see the elderly where I live and its horrific, some live in their cars because they can't afford the rent of $2-3000 a month, everything has gone up here and its still rising, we get a grocery tax this year then an electricity increase cost, we are on the edge of disaster everywhere, Im so fortunate we have the funds to live well but it galls me to see what our so called leaders are doing on purpose.
Then you have a million here and there of waste.
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