Six Scary, Inarguable Truths About The New Red Menace

Investors Business Daily had an excellent piece highlighting six facts surrounding our ridiculous national debt, federal deficit, government spending, and growth of government.

The funny thing is that the entire Tea Party/9.12 Project Movement knew these things years ago. What took the financial press so long to get with the program? Are they really that bad?

And do any intelligent, unbiased observers REALLY give Barack Hussein Obama the benefit of nonexistent doubt that he’s either 1) incredibly stupid and easily led, or 2) a traitor, and a clear and present danger to the national security of the United States of America?

Here’s the article; don’t forget to share with those on your email list!

Six Scary, Inarguable Truths About The New Red Menace

By JAMES CARTER | Posted 03/21/2011 05:45 PM ET

To sway public opinion behind President Truman’s policy of Soviet containment, Secretary of State Dean Acheson once admitted he was willing to “scare hell out of the American people” with arguments that were “clearer than the truth.”

But sometimes the truth alone is scary enough — particularly when you’re talking about the new red menace: the federal budget deficit.

Recent reports from the Congressional Budget Office highlight six indisputable truths, each arguably scarier than the last, that promise to shape the contours of the coming debate over how to handle this menace.

Truth No. 1: The CBO reported last week that the federal budget deficit is, under current law, expected to total $1.4 trillion this year and $6.7 trillion over the coming decade. At $1.4 trillion, this year’s deficit is larger than the annual economic output of all but 10 foreign countries.

Truth No. 2: Because of these deficits, the publicly held federal debt is poised to almost double to $18 trillion within 10 years, nearly quadrupling annual net interest costs to $807 billion in the process!

Truth No. 3: While increased spending and depressed revenue both contribute to this year’s federal deficit, the source of our long-term fiscal predicament is not a lack of revenues, but an overabundance of spending.

Over the three decades prior to the recent recession, federal revenues averaged 18.3% of gross domestic product while outlays averaged 20.8%. CBO reported last week that with the expiration of the Bush tax rates as scheduled under current law, it expects federal revenues to equal 20.8% of GDP — coincidentally, the historical average for spending — in fiscal 2021.

Federal outlays are expected to fall from 24.1% of GDP this year to 23.9% in 2021. In other words, despite the fact that the tax burden is poised to increase as a share of GDP to a level not seen since 1944, the CBO expects the federal budget will continue to generate massive deficits. And as the CBO reported last summer, “Looking beyond the next decade, the fiscal outlook worsens further.”

Truth No. 4: Reducing federal spending in 2021 to its historical average of 20.8% would require a 13% across-the-board reduction in projected spending for that year. Excluding mandatory spending (e.g., Social Security, Medicare) and interest on the debt from the cuts would necessitate an unrealistic 46% reduction in defense and nondefense discretionary spending. Any serious effort to nudge the federal budget toward balance will require a concerted effort to restrain mandatory spending growth.

Truth No. 5: If the CBO’s interest-rate assumptions are proved to be overly optimistic, the repercussions could be devastating. Late last year, for example, the CBO estimated that “if interest rates for all newly issued Treasury securities were one percentage point higher in each year than (assumed) … interest costs (over the 10-year budget projection period) would be higher by more than $1 trillion.”

To put this into perspective, a one percentage point increase would translate into a 15% jump in the cumulative budget deficit over the next 10 years.

And if the U.S. should ever lose its AAA credit rating, or if investors should ever lose faith in the federal government’s ability or willingness to manage its finances, the Treasury could find itself having to pay far more than one additional percentage point on its newly issued debt. Just ask Greece.

Truth No. 6: Confronted by these dire truths, the Obama administration opted to make the problem even worse. The CBO’s preliminary analysis of the president’s fiscal 2012 budget found that his policies would, relative to current law, increase both federal spending and the budget deficit.

While the president’s budget would keep the federal tax burden from increasing as much as scheduled under current law, its lack of spending cuts to offset the subsequent revenue loss would lead to $519 billion in additional interest payments over the decade and transform the projected $6.7 trillion cumulative deficit into a $9.5 trillion deficit.

Dean Acheson may have thought it necessary to scare the American people into supporting containment, but the new red menace facing the U.S. — the budget deficit — cannot be contained and left to wither on its own.

H/T Jared Law, sign up here:

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