Monday - April 11, 2011

Some Very Dark Numbers

Since it’s tax time again, I’ve been spending a lot of time using the old spreadsheet. I’ve had the TV on in the background, listening to the news people go on endlessly about the latest budget BS. Oh joy, after 2 weeks of wrangling, the wonderful federal legislature managed to cut just about 1% off the projected budget. The problem is that a huge portion of the budget is based on borrowed money, and unless it is the double super secret plan of our elitist superiors in DC to borrow and borrow and borrow from other nations until they beggar the world, and then claim bankruptcy, we’re pretty much screwed. Hey, I’ve long wondered if that isn’t their actual energy policy - suck the world dry before using our own assets, so it wouldn’t surprise me if that was their fiscal policy. We’d just better keep enough functional nukes on hand though if that’s the case. I hope it isn’t.

We’ve heard a lot of talk about “mortgaging our future”. You know what? It’s true. It’s worse than true, if by worse you can conceive of a mortgage that lasts 50 or more years instead of the more normal 30.

So I wondered, just how much of the federal pie goes to pay down the debt? And the current answer is actually impossible to find, because our wonderful Hopey Changey Democrat controlled government didn’t even bother to make a budget for 2010. And here we are in mid-April 2011, and there isn’t a budget yet for this year either. Seems to me like they aren’t doing their jobs. At all. But that’s a rope/tree/some assembly required rant for another day.

We always hear how China and other countries are financing us by buying our debt. Now, maybe I wasn’t listening close enough, but what rate is the USA getting? Prime? Half of prime? Are the wonderful communists in China just giving us the money for free, pay us back when you can, no worries? The hell they are. It’s business, and they’re moving major amounts of paper, so you know the rate is going to be most profitable.

I found two pretty good pages on the budget and where the money goes. Here and here. I know they’re out of date at this point, but as the saying goes ... it’s good enough for government work.

I ran some numbers and they are beyond bleak. The current level of spending, borrowing, and repayment does not even hold the line against the interest accrued on our debt, unless that entire 14.2 trillion dollars was lent to us at 1.73% interest or less. Do you wish you could refinance your home at 1.73%? Oh I bet you do!

So I assumed two possible interest rates: 2.5% and 5%. Then I applied a total Drewsolution, a draconian move that would cause riots and suicides all over. Keeping the tax level the same, I cut the entire federal budget in half. No sacred cows, no special interests, no “uncuttable” mandatory spending. For every dollar they’re spending now, they only get to spend 50¢ under my new plan. And every last cent of surplus taxes goes to paying down the debt, plus the one half of the amount we’re currently paying.

And the numbers absolutely suck.

Cutting the $3.83 trillion dollar budget IN HALF gets it down to $1.92 trillion, and with a revenue base of $2.56 trillion we no longer need to borrow the ONE THIRD of the budget as we are doing right now. So let’s go crazy, send the old folks and the poor folks out to starve and die of horrible diseases, and see what we could do then. I have to assume a stable tax base and no further devaluation of our money. Yeah, that’s unreal, so this is an academic exercise. But it makes the point: this $38.1 billion stuff on the news is horse manure. Passing an amendment to require a balanced budget is horse manure. The one and only way to pay down the debt is to apply something akin to Sharia law for the spenders: if I see your hand with a pen in it writing a check, I get to cut off your arm with a sword. Or, as Nancy Reagan would say, “Just say NO”.

With $14.2 trillion dollars in debt, cutting the budget in half and keeping it at that amount for decades would let us apply $765.5 billion a year to our debt. That’s almost 40% of the new death-by-austerity budget.  But this is what you have to do, this is how you have to live if you find yourself up to your eyeballs in debt. The United States of America does not get to call a Mulligan. We don’t get to say “oops, sorry, never mind”. We owe the money, and a very large amount of it has to be paid back. We’ve been borrowing since 1969, and we’ve only even balanced the budget once or twice in all the years since. The chickens have come home to roost, but they’ve metastasized into vultures. Hungry vultures. The only way to get rid of them is to carve up the dead horse they’re circling and burn it, one chunk at a time. And we have no choice but to stand down wind of the pyre. It’s really going to smell. Tough noogies; it’s our horse so it’s our responsibility. “First, stop feeding the horse” is a Stuck On Stupid Step. It’s a true one, but it only helps to clarify the situation if you’re trying to convince drooling imbeciles who are willfully blind. So, um, Mr. Government? First, stop feeding the horse!!!”

If we got those trillions for only 2.5% APR, and we stick to the plan come hell AND high water, then it would take 13 years to pay the debt down to the “manageable” $8 trillion point. It would take 25 years to pay it all off. And this is with super low interest and a budget that would just about cause a revolution. And absolutely sticking to the plan. I know, I said that already. I’m saying it again because these are completely new words to anyone in the legislature. Stick. To. The. Plan. Without. Exception.

At 5%, it would take 38 years to get the deficit down to $8 trillion. THIRTY. EIGHT. YEARS. It would take 53 years to pay it off. And in all that time the federal budget would not increase by a cent.

And if we maybe borrowed that money at 10%? Don’t even go there. Uh uh sistah no way no how. Talk to da hand! Don’t even consider any interest rate higher than 5.385%, because even under my wildly Draconian plan which puts nearly three quarters of a trillion dollars against the debt annually and does not borrow even a single penny, it can not be done. Even when it’s only compounded annually, the interest on $14.2 trillion is more than the amount my ultra-austerity budget pays if the APR is higher than 5.385%.

There is another way out of this mess. If we pay off our debt in straight dollar amounts, but the US dollar becomes second hand Charmin like the Zimbabwe Buck, then our national debt evaporates, because the money becomes worthless. And the kid pushing a broom at McD’s is earning $275,000 an hour. And we get the whole world off our back ... and our entire nation is bankrupt.

Hey, I hear the Democrats want to raise the debt ceiling again, and that Obama’s latest budget calls for borrowing half a trillion more than he did last time! Sweet. How’s that Hopey Changey shit working out for you?

Posted by Drew458     on 04/11/2011 at 07:28 PM   
Filed Under: • Economics • Politically-Incorrect •  
• Comments (1) • Trackbacks(0)  Permalink •  

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