By
Lou
Basenese
:
Halloween is still weeks away, but America's in need of a good
scare. Today. Why? Because an even bigger fiscal cliff than the one
threatening our economy at the end of 2012 is looming on the
horizon. Forget about another recession or depression. We're
talking about the potential to wipe out our great nation as we know
it.
Of course, you won't hear a single word about this tonight
during the first Presidential Debate. Both sides of the aisle spend
too much time bickering and campaigning, instead of educating. No
doubt, tonight promises to be a continuation of that trend. That's
why I've decided to step up and summarize the future of America in
three simple charts for you.
If you're financially or politically illiterate - or both - it
doesn't matter. We can all spot trends. And these three trends
should scare the living hell out of everyone.
Before we get to them, a quick note: Whenever I talk about
politics, my inbox fills up with nasty-grams. Half of them slam me
for being a gun-toting Tea Party member. The other half accuses me
of getting my talking points directly from the Democratic National
Party.
Obviously, both can't be true. So no need to share any vitriol
about my personal politics. This has nothing to do with me. This
has to do with America. Period.
Spare Me the Bit About Defense and Debt
The newswires are overrun with complaints about our spending on
two things: interest on our debt and defense. But you know what?
These two outlays only account for about 26.5% of federal spending,
combined.
Meaningful? Yes! Worth freaking out about? Nope.
Not when you consider something else that accounts for a
whopping 65% of federal spending. What am I talking about? Payments
to individuals via programs like Social Security, Medicare,
Medicaid, public assistance, food and housing assistance, and
unemployment assistance.
(Click to enlarge)
Almost two out of every three dollars spent by the federal
government goes to individuals now, according to the Office of
Management and Budget (OMB). That's up from less than one out of
every six dollars in 1952.
Sorry, fellow Americans. A government "for the people" wasn't
supposed to mean
monetarily
for the people. Regardless of your political persuasion, the trend
can't mathematically continue. Spending "to infinity … and beyond"
doesn't work in the real world.
Tax and Spend Gone Awry
Worse yet, we keep asking fewer Americans to help with our
spending problem. Hold back your knee-jerk political reactions and
just look at the numbers, would you?
I get that we just came through a Great Recession. So,
naturally, the percentage of Americans not paying taxes is going to
increase, as more people need extra assistance. But even that
doesn't explain this undeniable trend.
(Click to enlarge)
For 50 years (1950 - 2000), the percent of American's paying no
taxes stayed range-bound between 20% and 25%. In the last decade,
though, it's almost doubled.
According to the Tax Foundation, 41% of income tax filers in
2010 had zero or negative federal income tax liability. That's a
slight decrease from the 41.7% the previous year, which is a good
thing. But we're still galaxies away from the historical
average.
Again, this trend can't continue indefinitely.
John Merline, of
Investor's Business Daily
, summed up this situation perfectly last year, saying, "When you
put these two trends together, what you find is that the federal
government has over the years essentially turned into a gigantic
wealth-transfer machine - taking money from a shrinking pool of
taxpayers and giving it out to a growing list of favored
groups."
He adds, and this is the most important point, "This situation
will make getting the federal budget under control increasingly
difficult, since it will invariably involve pitting those writing
checks against those cashing them."
We need to get our spending under control. Period. But
politicians can't seem to stomach such a reality.
Instead, they're ignoring the fact that they're pitting
Americans against each other and just kicking the proverbial can
down the road. Forget about the transfer of wealth from present-day
Americans, they're also transferring the wealth of
future
Americans.
How so? By borrowing and borrowing and borrowing some more.
Again, spare me the knee-jerk political reactions and focus on the
pretty pictures. They tell the true story.
(Click to enlarge)
To continue on our current trajectory of paying more and more to
individuals, publicly-held debt needs to soar. Keep in mind, this
is money we don't have or haven't even earned yet.
This isn't based on my calculations, either. This chart comes
straight from page 58 of the OMB's Fiscal Year 2013 Budget of the
U.S. Government: Analytical Perspectives.
In the government's own words, "publicly-held debt is also
projected to rise persistently relative to GDP."
Persistently? Not so sure that's the best adverb, but we'll go
with it.
Bottom line: If we don't curb federal spending
and
get Americans off the payroll, it's not going to matter how much we
tax the Americans that actually pay taxes. It will eventually
become mathematically necessary to tax
everyone
just to survive.
Here's to hoping we'll hear some
real
solutions to these
real
problems when Governor Mitt Romney and President Barack Obama go
toe-to-toe tonight. I'm not holding my breath, though.
See also
Cree Management Discusses Q1 2013 Results -
Earnings Call Transcript
on seekingalpha.com