The Right Opinion

Capitalism?

By Rich Galen · Dec. 3, 2012

With the Redskins playing the Monday night game and the National's still not having made a deal with their 1st baseman, Adam LaRoche, there's not much to think about here in Our Nation's Capital other than that pesky fiscal cliff.

Depending on what comes up in your Google search for “What will be the effect on GDP of the fiscal cliff” you get answers ranging from a drop of about 1.4 percent (NASDAQ) up to four percent (Washington Post).

Most of the guesses fall in the 3 – 3.5 percent range.

No matter how much the economy might contract as it free falls down the fiscal cliff, this much is true:

We now have proof that the U.S. economy is totally – totally – dependent on federal government spending.

The sequestration piece of the cliff calls for spending cuts of $1.2 trillion over the next 8 years – an average of $150 billion per year.

According to the White House website, the first time the Federal government spent more than a billion dollars in a single year was in 1917 when we spent just under $2 billion having entered World War I in April of that year. The next two years of full-blown involvement saw spending of $31 billion to pay for the war.

Fifteen billion in 1917 dollars would be about $180 billion today. That's a far, far cry from the $3.8 trillion estimated for FY 2013 in which we currently reside. In fact it's just under five percent of this year's budget outlays.

In 1944 and 1945 – the two highest years for spending during World War II we averaged about $92.5 billion. In today's money that would be about $946 billion – still less than 25% of today's outlays.

SIDEBAR

To get this relative spending, I am using a site called www.measuringworth.com. The numbers I'm citing are using what is known as the GDP deflator. There are other measurements including commodity costs, income, and wealth.

END SIDEBAR

The first time the Federal government spent a half trillion dollars was in 1979 ($504 billion) and the magic trillion dollar barrier was first crossed in 1987 at $1.007 trillion.

Just to tie a bow on all this spending we first spent $2 trillion in 2002 and hit the $3 trillion mark in 2009.

I understand that the world in 2012 (or 2013 in fiscal years) is a far, far cry from the world in 1917. And, I am not arguing that we return to the abject lack of any meaningful safety nets.

Getting back to the $150 billion a year in spending cuts under sequestration, they equal only about four percent of estimated outlays for FY 2013.

As we discussed in Friday's MULLINGS “(Five Percent” a relatively minor cut in Federal spending would not, depending upon how it's distributed, cripple the government.

President Obama's tax plan will, his team claims, raise $1.6 trillion in revenue for the Feds over 10 years. Even I am confident that I can do that arithmetic in my head: $160 billion a year.

Including 2013 that means additional income to the government of $800 billion over the next five years.

Problem is, the White House' own estimate show accumulated deficits of over $3.4 trillion or $680 billion a year (it is not a straight line as the budget calls for a deficit of $901 billion for this year alone).

Subtracting $800 million from $3.4 billion still leaves $2.6 trillion in accumulating national debt over the next five years.

Adding the sequester savings ($150 billion a year or $750 billion over five years) to the increased revenues we get $1.5 trillion.

We are still over $1 trillion short of even balancing income and expenditures, much less reducing the debt.

With all of these numbers bouncing around, I am absolutely certain I've made an error or two.

But, assuming I'm in the ballpark, all this talk about the fiscal cliff may be more income protection for the millions – hundreds of millions – of Americans who get money through aid, guarantees, working for, or selling things to, the federal government.

I hope I'm wrong, but it seems to me that we have long since erased most, if not all, remnants of capitalism from the American economic system; and it happened way before a guy named Barack Obama became President.

The nation will collapse if the Federal government doesn't continuously feed the economy.

Forever.

On the Secret Decoder Ring today: Links to a really good Q & A about the fiscal cliff and a link to the WH annual spending tables. Also another amusing Mullfoto from Great Barrington, MA.

Copyright ©2012 Barrington Worldwide, LLC | Mullings.com

8 Comments

Ct-Tom in NC said:

"The nation will collapse if the Federal government doesn't continuously feed the economy."

But, the only feed the government has is what it takes (by force) from the economy, and before it feeds the economy, it must feed its voracious self. I believe there is a problem here.

Then, there is the lack of "meaningful safety nets" in 1917. I guess I missed all of the news stories of Americans starving in the streets and dying of neglect in 1917. It is, for the most part, the "meaningful safety nets" that are currently doing us in.

Monday, December 3, 2012 at 8:11 AM

Wayne in Hinesville, GA replied:

Tom, What it really comes down to is this: This administration and the Demorats know that in order to remain in power they must fund the so-called "Safety nets" no matter how it affects the economy. As long as they can keep them on welfare, poor, and stupid they'll have no problems getting their vote. Between the unions, women, blacks, hispanics, and the "poor" it will be hard for any Republican to ever win the Presidency.

Monday, December 3, 2012 at 11:00 AM

George Rogers Clark in Ohio replied:

Right again, Sarge. The "deceived" are always the prey of the "deceiver" and the secular-liberal-socialist left wing of society and government must be deceived, and have been for decades, for there is no reasonable explanation for their folly. I wonder who their deceiver is???

Monday, December 3, 2012 at 12:03 PM

Tom Mumford in Manchester, Connecticut USA replied:

Wayne, respectfully, I don't think what you replied to was what Ct-Tom meant. I also don't think he would disagree with your point.

Tuesday, December 4, 2012 at 7:01 AM

George Rogers Clark in Ohio said:

Rich, call me a simple man, but I do not get it.

You said in regard to federal spending: "The nation will collapse if the Federal government doesn't continuously feed the economy."

Nothing feeds the economy accept that which produces something. The fed merely consumes our tax dollars and a growing pile of debt to do those things you called feeding the economy.

For example, you might say the government is a large employer, because it is. But those employees do not produce anything (apparently, many do not even work) that becomes part of the economic system. Consumers of tax dollars who do not produce anything to offset their cost to taxpayers remain consumers. When they go out and spend their wages in the marketplace, that will not balance their costs on the front end, because that does not go back to the MAJORITY of the tax payers that paid the wages. Do you see what I mean?

In my perspective, a federal employee cost me money, and I get no ROI. However, if I build a business with that money, or invest it in a productive enterprise, at least I have a chance for a recognizable ROI.. a return to me personally.

Except for military spending to keep America strong, I view most other federal spending to be waste. After-all, national defense and interstate commerce are the two imperatives the founders placed on the Federal Government.

OK.... I said I am a simple man, so if I am wrong, give me the evidence and I promise to seriously consider it.

Monday, December 3, 2012 at 11:58 AM

Mike McGinn in People's Republic of Maryland replied:

See if you can follow this logic.

The government is a large employer, yes? So let’s fix our employment problem and have them hire more people, right?

But a government employee is paid with tax receipts from the private sector, not from profit on a product or service. Government employees don't pay taxes on their government income, per se. They simply give back some of the tax money that was taken from the private sector to pay their salary in the first place.

In other words, the government is a leech upon the private sector. Eventually it gets so big that there's not enough "blood" to suck out of the host body (i.e., the private sector) to feed it. Eventually the host weakens and dies, and the parasite dies shortly after that.

Government is one of those necessary evils. Unfortunately we have to have it. The above discussion exemplifies why it should be as small as possible.

Tuesday, December 4, 2012 at 1:16 PM

Tod the tool guy in brooklyn ny said:

Most other fed spending is a waste-agree totally there.There were only 3 offices of the Executive branch, back in 1776; War Treasury, and State dept, today there are 15 cabinet positions, gobbling up billions upon billions. The TVA is still with us(A)!US Energy,created by Nixon--get rid of it and DRILL, BABY DRILL!!

Monday, December 3, 2012 at 5:19 PM

Mike McGinn in People's Republic of Maryland said:

Here's another little tidbit for you, Richard.

In 1917, when our federal government spent $1.954 billion ($35.4 billion in today's dollars), they allocated 30% of those expenditures to constitutionally mandated defense spending.

In 1919, the peak WWI spending year, the federal government spent $18.493 billion ($247.3 billion today) and allocated almost 60% to defense spending.

In 1945, the peak WWII spending year, they spent $92.712 billion ($1.19 trillion today) and allocated an astonishing 90% to defense spending.

Today they are shoveling out Ben Franklins to the tune of $3.8 trillion, yet only 19% of that is for defense…and we’re fighting a global war on terror? Where does the rest of the money go?

Tuesday, December 4, 2012 at 1:09 PM