All of us should be absolutely terrified by this graph below. Why? Because it so clearly illustrates what kind of crazy mess we are already in, and what horrific magnification of this mess we will see in the next four years if President Obama and the rest of the Keynesian redistributionists get their way.
The most pressing question for Americans in 2013 is: are we a nation of free enterprise or of government intervention? Case in point - almost 75% of the recovery jobs in the past 2 years are with the government or government funded entities (hint: propped up "green energy" companies don't count as private enterprise). We are looking at record levels of revenues but exponentially higher levels of government spending. Obama and most of the democrats are perfectly happy to continue on with this strategy, thinking that they will be able to tax "the rich" into submission, not really caring that even forcibly taking every cent of income from the rich will barely make a dent in the deficit spending and that we are mortgaging away our children's future to China. Ultimately, Obama would like as many people as possible dependent on the government, because that's what makes his redistribution plan possible, but the balance is tipping and soon private sector people won't be able to support everyone in made up government jobs.
How long can we keep going at this rate before there are not enough people to redistribute from? If the current course is not changed, at some point we'll reach a point where no productive people will work in this country. It will become either Animal Farm or Atlas Shrugged.
And frankly the Republicans are little better than Democrats when it comes to spending. Fortunately Tea Party Republicans are forcing the conversation in both houses, and now all Republicans are at least giving lip service to reducing spending. It remains to be seen if they will actually follow through. The debt ceiling discussions will be the perfect opportunity for Republicans to demonstrate that they are actually serious about massive cuts to spending and aren't just all talk. They have already been embarrassingly willing to give in to Obama's "I won the election, so we'll do what I want" posturing. Let's see if they are able to man up and grow a pair. If not, then in 2014 it will be the rest of us that will be to blame if we don't elect representatives actually willing to stand up for the future of this country. In the meanwhile, since all our elected representatives have shown themselves incapable of closing the checkbook (with the notable exception of Newt Gingrich's Contract with America congress under Clinton), American's need to actively lobby for a balanced budget amendment.
Where is the outrage from the American people over these ridiculous Fiscal Cliff "negotiations"? Every conservative-leaning person in America should be writing their Senators and Representatives demanding that they cut spending and extend the Bush tax cuts for everyone. Or, we can continue to rack up even more massive debt than we have already. When our public debt has outpaced the growth of the private economy, we have a major problem. We have not been at this level of spending since WWII, and that spending immediately dropped post-war. For us, there is no end in sight, for the next four years at least, and the result is truly frightening.
President Obama won't meet with Republican congressional members and we're not sure he's even been meeting with his own party members. He has met with Rachel Maddow and Al Sharpton however, so we know he's getting good advice on the economy. It's also interesting to note that in the Obama budget proposal Geitner was sent out to sell, Obama is freely spending the "savings" from bringing the troops home from Iraq and Afghanistan and has proposed billions in new "stimulus" spending.
The fact that people on the street are either unaware of these issues or think the government needs to "do more" http://bit.ly/YAjhtP is a sad commentary on the Republican party's inability to promote free market principles. Republicans need to get their act together and inform the American people about the coming bankrupting of the country and why the current course is unsustainable. This crisis is also a test for the current Republican members of congress. They need to understand that they will be held accountable come 2014 or 2016 election time for the positions they take during the fiscal cliff negotiations their votes on the budget ultimately put forward.
A fiscal stimulus package is the gift that keeps on giving! It provides 1) a temporary bump in GDP 2) an equivalent drop in GDP when it's over and 3) a further drop in GDP later as it's paid for by higher taxes or by increasing the debt. That's why the Congressional Budget Office warned that the Obama stimulus would hurt the economy in the long run. It is essentially a parachute adding drag to an already labored system. The greater the stimulus, the greater the effects - both positive and negative - with the negative effects outweighing the positive. The effect is magnified when stimulus money goes outside of the American economy to other countries as much of the Obama stimulus did; we get a smaller bump but still pay the full boat.
Are we so willing to close our eyes to the fate of other big spending countries, or is it selfishness and the growing "what's in it for me" culture? I think about the future impacts of today's runaway spending and wonder of we're going to follow in Greece's footsteps with unemployment over 25% and people rioting in the streets as the government imposes unavoidable austerity measures? Unless we get spending under control to the point where we can actually cut the debt, we are well along that road.
I'm sure many are thinking today that with the election having gone their way, all with be right with the world and President Obama will be free to continue with the policies he promoted during his first term. The split government, however, will make both the president's and the congreses jobs more difficult, as the last two years have demonstrated. We live in an age of intense partisanship, where the opposing parties really do have fundamental differences in the way they see the country and the role of government. Yesterday's election resulted in a second term for Obama and maintained Democratic control of the Senate, but the House remains firmly in control by the Republicans.
The term "Fiscal Cliff" is used to refer to the set of economic circumstances we currently face as we near the end of 2012 with the Bush-era and 2011 temporary tax cuts set to expire, automatic cuts in entitlement programs agreed to as part of the debt ceiling negotiations ready to take effect, and new taxes kicking in as part of Obamacare. It is unlikely the President and lame duck Congress will be able to work out a compromise in the next month to stave off the impending hit to business and households in 2013. In all likelihood more temporary stop-gap measures will be put into place and will just serve to keep the country sluggishly marching in place and the economy as stagnant as it has been the last four years. It is worth noting that the President has yet to get a budget passed by a split congress and the Democratically led Senate has vowed to block Republican proposals that cut taxes or actual spending.
The other "Fiscal Cliff" we face is the long-term crisis looming as we grow our National Debt to unsustainable levels with ever-increasing budget deficits. President Obama is seemingly disinterested in or lacking understanding of the implications to the nation's future economic growth if the current trend is not reversed. Of course, the effects are relatively long-term, rather than the immediate time horizon the president and his constituency look to. While it was hoped we could spend our way out of the current recession (a la the "stimulus"), we have seen that this does not work, sustainable jobs are not created and our National Debt has grown to $16 trillion - larger than GDP - the measure of overall production for the entire country.
As the debt grows, interests rates increase on the debt as the risk of default grows. Anyone remember Latin American countries defaulting on their national debt? But can't we just grow the economy to pay it back? As anyone with increasing levels of personal debt knows, a greater percentage of your income goes to servicing your debt, squeezing house hold spending. As the nations debt increases, taxes need to be raised to cover the debt burden while domestic spending gets squeezed putting the brakes on the economy even further. Contrary to popular belief promoted during the election, we could seize the entire income of the top 1%, or 5% for that matter, and still not make a dent in the debt! This then becomes the future we are saddling our children and children's children with while we refuse to reign in spending and refuse to learn the lessons of history and spending our way out of trouble.
