We have had several bubbles before, but if the Obama administration has their way, “you ain’t seen nothin’ yet.”  Currently the budget for the federal government is $4 trillion dollars.  That’s right, your federal government will spend approximately (which means probably more) $4 trillion in one year.  Of that amount $202 billion is interest on the national debt.  In an article in the New York Times today by 2019, a mere ten years from now, the portion of the budget directed to interest payments will be over $700 billion, or three and a half times what it is today.  Many people have trouble grasping how much a trillion dollars are, and within ten years we will be paying three-quarters of a trillion dollars just to cover the interest without paying off any of the principle.

Family Budget Analogy

We all understand the dramatic effects of too much debt, as the point has been driven home every day throughout this financial crisis.  Bankruptcy filings, home foreclosures, bailouts, all resulting from more debt than we can pay the interest on, let alone pay back the principle.  You see commercials on television every day for companies that will help you renegotiate your credit card debt, your mortgage, intervene on your behalf with the IRS.  None of those programs are available to the federal government as a debtor. 

Obama’s Out of Control Spending

The Obama administration seems oblivious to the problem.  As bad as it is they just keep on spending or want to spend more:

• Stimulus package — $787 billion.  Despite evidence that it is not working and widespread opposition from the American people, the Obama administration is simply declaring that it is working and we need to do it again with a second stimulus
• Cap and Trade — this is a program that will drive energy costs through the roof for no real benefit.  After all if, as is becoming more and more apparent, global warming is not man made then it cannot be stopped by man either.  Higher costs will lead to businesses closing down, laying off people, and generating less tax revenue from both the businesses and the individuals it laid off.  Result — an increase in the deficit.
• Health Care — another $1 trillion of IOUs piled on our children’s back and if Medicare’s history is any guide, these numbers are well below what will really happen.

The Truth About Government

The truth is that government doesn’t create anything.  They don’t generate income.  Everything that government has to spend comes from you and me.  The government takes it from us (or throws us in jail for tax evasion) and then spends it.  If they can’t get enough from us, they borrow the difference.  But somewhere down the line, that money has to get paid back.  A news report today said we have the opportunity to just write a check to the Treasury if we are concerned about the deficit and want to help pay it down!  Let’s see how many of Obama’s wealthy supporters sign up for that program.

Runaway Train

Our federal government is a runaway train and if we don’t stop it very soon and pare it back to the functions enumerated in the Constitution, we will get hit with a bubble so big, that there is no Hollywood screenwriter that could even begin to conceive of how to portray it.  $700 billion folks, that’s $2,059 in INTEREST for every man, woman and child in America.  Ask yourself this, if you are a family of four are you prepared to write a check for $8,235 to the federal government for interest alone?  You don’t get anything for your money, it just keeps your government from defaulting on what they already borrowed. This will be on top of your regular tax bill. And the next year you will have to pay it again and probably more.  It’s time to stop the madness.  It’s time to stop the spending.  It’s time to stop the expansion of government and start shutting down departments.  It’s what you would do at home in a financial crisis, it’s what a small business would do in a crisis.  This is a crisis that we can still get under control, but if the debt continues to grow to the point where we can no longer afford to pay even the interest, America will be a footnote in history.

Do I have your attention now?

Early this morning I was listening to a news broadcast where they said that this fiscal year’s federal budget deficit (October 2008-September 2009) will top $1 trillion which is more that triple the largest budget deficit in history.  That sounded pretty bad even considering the financial bailout that the government was undertaking to keep the money flowing.

Reading later in the day in the Wall Street Journal, Obama is quoted as saying, “We’re already looking at a $1 trillion budget deficit or close to a $1 trillion budget deficit, and potentially we’ve got $1 trillion deficits for years to come,” {emphasis added}.  Years to Come?  This is hope? This is change? I’ll give you a moment to try to wrap your mind around that statement before I continue.

If we see trillion dollar deficits for years to come, That’s All Folks!, our economy is gone, G-O-N-E.

Now I understand he may have just been saying that for the shock effect because he follows that statement with the another about the necessity of budget reform.  Budget reform? People, budget reform is not going to close a trillion dollar shortfall, and the very fact that the president-elect even utters the words is like shouting FIRE in a crowded theater.  Does he think that is leadership?  Here is where Obama’s lack of executive experience is on full display, and the man is yet to take office.

In an excellent piece on Cafe Hayek, Russ Roberts explains that if you cut taxes but you do not cut spending by an equal or larger amount, you are not really cutting taxes.  All you are doing is moving them around.  To put it another way, if you cut taxes today and spend the same or more, you are just deferring the taxes to later.  The debt will eventually have to be paid and it is paid through taxes.  So with trillion dollar budget deficits on the horizon, there will be a tax bill coming due that will crush the economy for us or for our children.

Someone needs to take Obama aside and tell him never to make such a public statement again, lest someone throw a net over him and carry him off to an asylum.  Second, he needs to get with his advisors and start hacking away at the size of the government and I recommend starting with the Department of Education.  Although it took 28 years for that department to spend a trillion dollars, it’s a start.  But this is not going to be fixed by tinkering or eliminating earmarks.  Our government has gotten too big and is meddling in too many things, causing many of the problems it is now trying to fix.  Government needs to be cut down to size.