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A Primer on the Fiscal Cliff

Recently I gave a talk on the Fiscal Cliff — how we got here and where we are going. Since several people have asked, I posted the videos from the talk. For whatever reason, the last 2 minutes ended up a second separate video, but you can view them one after the other. Enjoy!

Fiscal Cliff, Part I

Fiscal Cliff, Part II (ending)

Pondering the Fiscal Cliff Numbers


Consider this: if we go over the fiscal cliff, about $600 Billion will be taken out of the economy in a combination of tax increases and lower spending. This is certain to put a stranglehold on an already weak economy. Obama has had trillion dollar deficits each year of his presidency — the highest deficits of all the presidents in history. Even by reducing the deficit to about $500 Billion by the automatic fiscal cliff triggers, Obama would still be responsible for a deficit that is larger than all of his predecessors. Clearly, spending is at the heart of the problem.

Forget 12/21: Today, We are 1331 Days Without a Budget


Time for another milestone. I noted it when it was 1,000 days past, but today we are now 1331 days without a budget. Nevermind all the doomsday talk for tomorrow — our fiscal situation is dire now.

April 29, 2009 is the last time Congress passed a budget. Obama’s two budgets proposals failed 0-97 in the Senate, and 0-414 in the House. No Democrats would vote for, or even sponsor, his proposals.

Right now we are about: $16,370,000,000,000 in debt. But that is not the whole picture. It doesn’t include entitlement debt, which makes the situation more egregious.

And what about the fiscal cliff? Harry Reid has decided to send Congress home for Christmas and reconvene on December 27th, and rules out a vote on Boehner’s “Plan B”. On the contrary, Eric Cantor has said the House has the votes for “Plan B”. “Plan B” raises taxes for taxpayers above $1 million, while the Senate version is a much lower, $250,000 threshold. More discussions, but no answers. We continue on in a state of uncertainty.

Yesterday, I wrote out a primer which showed all government debt, spending, and fiscal cliff solutions scaled down to manageable numbers. If you were to reduce equally everything by $10 million, you can understand the figures in amounts we are use to.

For instance:

Total Current Financial Picture for a Family of Three, on a $25,000 income
Annual Revenue: $25,000
Annual Spending: $38,000
Annual Expenses/Deficit per year: $13,000
Current Government “Shadow” Debt: $156,000 (ie. think – like your mortgage & credit cards)
Promised Future Entitlement Debt (SS and Medicare): $603,000
Total Family Debt on a $25,000 Income = $759,000 + $13,000 in annual added deficits
Debt “Fiscal Cliff” Solutions:
Obama’s Plan: cuts a mere $812 a year for 10 years and adds $1242 in revenue
Boehner’s Plan: cuts a mere $955 a year for 10 years and adds $955 in revenue.

You can read more here to see the breakdown and all calculations.

With 11 days out before the fiscal cliff deadline and no solution in sight, you can be sure the “no-budget clock” will also continue ticking. 1331 days…and counting.

Spending Cuts Better than Tax Hikes


A quick little snippet coming from the AP — a new poll shows that more Americans would rather cut spending than raise taxes

56 percent to 31 percent, more embraced cuts in government services than higher taxes as the best medicine for the budget, according to the survey, which was conducted Feb. 16 to 20.

Thankfully, a majority of Americans have more sense than our Administration these days

 

Friedman on Economic Fallacy

The late Dr. Milton Friedman cogently expels one of the most persistent economic fallacies regarding the government, spending, and producing. Take 3 minutes and be enlightened and entertained.