Take it to the Limit

This on going circus we call the United States of America is starting to sound like the refrain from an Eagles song.

“So put me on a highway
And show me a sign
And take it to the limit one more time”

As much as all of the crap that is taking place in Washington is turning my stomach, it is unfortunately obvious to even the most casual observer that the government will have to increase our debt limit.  But to the same observer it is also obvious that we (The People) cannot continue down this path of allowing the government to spend more than the government collects.

The following is a plot of Revenue and Expenditures per Person for the United States since 1980.  The curves are divergent.  The Great Recession of 2008 certainly did not help the situation all it really did was to accelerate the divergence between the two curves.

Real spending cuts must take place.  Real revenue increases must take place.  We the people have allowed our government collectively since 1981 to expend on average $1.20 for every $1.00 of revenue.  Some years have been much worse.

Source http://www.fms.treas.gov/mts/index.html

After the limit is extended, and the United States Debt offering is downgraded by the various rating agencies and the bond market starts to into the punishment phase of the market reaction.  This already appears to be baked into the mix.

How much of a haircut do we get to take?  It looks like 50 percent just to get to even, see the graph above.  So through some very arcane and macabre process we call the United States Congress, spending needs to be reduced, and revenue needs to be increased.  Is the gap closed by 50/50 split between expenditures reduction and revenue increases?  Is it a 75/25 split, or is a 25/75 split?  I have no bloody idea.  50/50 at first blush appears to be the fairest.

There are three things that we do know.  1. We will not close this gap via spending reductions alone.  2. We will not close this gap via revenue increases.  3. We will not be able to continue to fund this gap via the issuance of sovereign debt.

So Take it to the limit one more time, it might be our last.

Why are we supporting NATO? Why are supporting NATO in Libya? What does it have to do with the Deficit?

Given the latest remarks by the French President Nicolas Sarkozy 24 June 2011. http://www.defensenews.com/story.php?i=6914474&c=EUR&s=TOP  Why are we supporting NATO (I mean the French and the Brits) in this endeavor (folly) in Libya?

This question begs some additional larger questions.  What is purpose of NATO? (This is left to the reader)  Why is the United States still in NATO? (Ibid.)  Why is the United States paying most of the cost of NATO? (Ibid.)

In 1999 the United States was paying 1.148 Trillion Dollars for NATO operations.  In 2010 the United States paid somewhere around 0.712 Trillion Dollars for NATO operations.  We still pay the same percentage of the Total NATO Budget; because the NATO budget is smaller and  hence our portion is smaller.  Of course the main reason the NATO budget is smaller is that the United States is given less.  But regardless of the reason the United States is spending nearly three-quarters of a Trillion Dollars to be a member of the Country Club.

If we the people do not feel that we the people are getting our money’s worth then it is up to we the people to change the situation.

Just a little back of the envelope budget exercise, I know that it is as crude as an axe, but it is at least a starting point.  If the United States could magically drop out of the NATO Country Club, and stop paying our annual membership due what would that due to the United States Budget deficit?

The effect on the FY 2010 Budget would have resulted in a 54.9 percent reduction in the Deficit.  Here is how the math works out.  According to the Financial Management Service of the Dept. of the Treasury, May 2011 Monthly Treasury Statement the FY 2010 deficit was  $1,294,203,000,000.00.  I put all of the zero’s in for effect, since the MTS reports their number in Million, we do not want to scare the public.  If we subtract out the $710,000,000,000.00 for NATO for FY 2010, we are left with a deficit of $583,203,000,000.00 for FY 2010, which is a 54.93 Percent reduction.

If we get a little more adventurous and subtract the $11,400,000,000.00 for the F-#%, (F-35) program, and the $30,000,000,000.00 for the supplemental Afghanistan funding we would have knocked down the FY 2010 deficit to  $538,803,000,000.00 which is a 58.3 percent reduction.

Three items and we are nearly 60 percent the way to reducing the deficit to zero.

The NATO numbers come from the following link http://www.thefiscaltimes.com/Articles/2011/06/22/Libya-May-Be-NATOs-Last-Mission.aspx

The F-#% (F-35) Program come from the following link www.afa.org/edop/2009/R40567.pdf

The FY 2010 Supplemental Number for Afghanistan from the following link http://democrats.appropriations.house.gov/index.php?option=com_content&task=view&id=623&Itemid=28

The Deficit numbers come from the following link http://www.fms.treas.gov/mts/index.html

Three items from the United States Budget ok two from the budget, and one from off the budget. And we have made a very significant inroad into the problem.  The deficit does not care if they on or off the budget.

As I used to say when I taught Physics, I have made the first pass; the rest is left up to the students to complete.

The best thing about cutting these items is: 

NATO does not vote in any House, Senate, or Presidential elections, so there should be no constituent’s cry about it, all right there might be some, who could lose contracts.  Given the resent remarks by the President of France on the outgoing SECDEF, it going to be hard if not down right impossible for most of us to continue our support of NATO.

Afghanistan has few if many individual who vote in any House, Senate, or Presidential elections.  There might be a few screams in Afghanistan, but that’s on the other side of the world.  Most of the screams will be from learning that the Gravy Train is leaving the Station.

F-#% (F-35) does have some constituents, but with killing of the F-#%(F-35) we will still have to spend some funds upgrading and purchasing additional legacy aircraft, and since they come from the same sources, the crying should not be as loud.  Yes they are not going to make as much money, but they are still going to make some money.