Financial Report

by Dave Schuler on January 22, 2013

If you’re not aware of it, I’d like to draw your attention to a publication of the Treasury Department, the Financial Report of the U. S. Government for 2012. It makes for sobering reading, particularly the projections part beginning around page 136. I find their assumptions of roughly 5% nominal growth, more than 2% real growth, and 5% Medicare spending growth per recipient unduly rosy. Even with those assumptions Treasury characterizes the situation as “unsustainable”:

The projections in this Report indicate that current policy is not sustainable. The debt-to-GDP ratio is projected to reach 395 percent in 2087 and to rise continuously thereafter. Preventing the debt-to-GDP ratio from rising over the next 75 years is estimated to require some combination of spending reductions and revenue increases that amount to 2.7 percent of GDP over the period. While this estimate of the “75-year fiscal gap” is highly uncertain, current fiscal policies cannot be sustained indefinitely.

It is important to address the Government’s fiscal imbalances soon. Delaying action increases the magnitude of spending reductions and/or revenue increases necessary to stabilize the debt-to-GDP ratio. Relative to a reform that begins immediately, for example, it is estimated that the magnitude of reforms necessary to close the 75-year fiscal gap is nearly 20 percent larger if reforms are delayed by just ten years, and more than 50 percent larger if reform is delayed 20 years.

I might add that increasing the tax rates is hard enough but increasing the effective rates is something else again.

My general feeling from the report is that Treasury also assumes an abandoning of Keynesian “pump-priming” in reaction to economic downturns, an assumption I find unrealistic in the extreme. I may post more on that aspect later.

{ 8 trackbacks }

Trevor Loudon's New Zeal Blog » Watcher’s Council Nominations – Inaugural Edition
January 23, 2013 at 11:29 am
Watcher’s Council Nominations – Inaugural Edition | askmarion
January 23, 2013 at 4:01 pm
This Week’s Watcher’s Council Nominations | therightplanet.com
January 23, 2013 at 5:00 pm
Watcher’s Council Nominations – Inaugural Edition | therightplanet.com
January 23, 2013 at 5:01 pm
GayPatriot » Watcher of Weasels — 01.24.13 Edition
January 24, 2013 at 12:18 am
Bookworm Room » Watcher’s Council nominations for January 23, 2013
January 24, 2013 at 6:41 pm
WoW Inaugural Edition |
January 24, 2013 at 7:20 pm
Watcher’s Council Nominations – Inaugural Edition » Virginia Right!
January 28, 2013 at 7:03 am

{ 27 comments… read them below or add one }

Drew January 22, 2013 at 9:51 am

“I find their assumptions of roughly 5% nominal growth, more than 2% real growth, and 5% Medicare spending growth per recipient unduly rosy.”

“Unduly rosy” is rather charitable in my view. I’d say “laughable.” But that’s just me.

Also, and perhaps its because I’m an LBO guy where things move in a relative sense at the speed of light, 75 year notions are just non-sense. Unsustainable leverage ratios and debt service calculations will be upon us far before then unless the money continues to be helicoptered in. I would remind people that we have already had one credit down grade, and inflation ain’t no 2%. And, as Dave points out, assumptions of restraint in the face of perceived benefits of “pump priming” in the next 10-15 years as business cycles occur can only be decribed as bizarre.

I read that Spain has reached 25% unemployment. (No, I’m not predicting that for us.) But its a Petrie dish for the policies now being pursued in the US, as have been pursued in Europe. 15% unemployment here is not unthinkable. I’m not sure a lot of liberals care.

Gee, I wonder why the pols decided to leave the inheritance tax rules basically in place?

Icepick January 22, 2013 at 10:13 am

“Unduly rosy” is rather charitable in my view. I’d say “laughable.” But that’s just me.

Hey, you’re both assuming that these aren’t the goals that our leaders have in mind. They don’t mind a shitty economy, and in fact prefer it. The poorer people are the more likely they are to vote for the Democrats. People from broken homes tend to vote for the Democrats. The Democrats are just pursuing a natural set of policies, making more poor people from bad homes and bad neighborhoods. That way Obama continues to take FAAAAAABBBBBUUUU-LOUS vacations that cost more than most people will earn in their lifetimes. That way Harry Reid continues to get richer. That way Nancy Pelosi is guaranteed that her grandchildren will be richer and more powerful in time than she is now. And if it means ruining tens of millions of lives to do so, they’re down with that.

This report is like manna from Heaven for Democrats in the know. They’re salivating at the ruination of tens of millions of lives, because it will profit them in the end.

Icepick January 22, 2013 at 10:15 am

Gee, I wonder why the pols decided to leave the inheritance tax rules basically in place?

Because they got theirs, Drew. Here’s hoping they get what they deserve.

Drew January 22, 2013 at 10:20 am

ice

The new and improved 2012 version of Drew is trying to be more diplomatic……..as much as it pains me. The (willful?? heh) naivete of some folks tests my will. We are saying the same thing.

You should hear some of my stories about a certain powerful Chicago alderman with the initials EB. Dave will understand.

Icepick January 22, 2013 at 10:25 am

Sorry, Drew, I was answering a question that I knew was rhetorical, but I couldn’t help myself. All the celebration of the economic destruction of the nation yesterday has me in a worse mood than usual. Seeing our lords and masters eat meals more expensive by the plate than my weekly food budget while congratulating themselves on what a fine job they’re doing of putting more and more people on welfare leaves a bad taste in my mouth.

jan January 22, 2013 at 11:14 am

The poorer people are the more likely they are to vote for the Democrats.

As cynical as that statement is, it’s becoming more and more difficult to entirely dismiss it. One has to wonder why a president passes over woes of the economy, putting his energy more into rallying his base on social issues that divide the country.

As for those vacations, you would think The First Family would be setting an example of frugality, rather than flaunting their extravagances in the face of so many being out of work and struggling just to make ends meet. Marie Antoinette Syndrome comes to mind….

Also, the MSM is becoming more and more reckless and unreal in it’s bias and partisan blind spot. Where was the reporting on that dismal GAO report? IMO, most of them should give up their press credentials and form an Obama Fan Club, where their cheerleading fawning over, and drooling would be far more than appropriate.

Icepick January 22, 2013 at 1:26 pm

As cynical as that statement is, it’s becoming more and more difficult to entirely dismiss it. One has to wonder why a president passes over woes of the economy, putting his energy more into rallying his base on social issues that divide the country.

jan, a lot of what is happening makes more sense if you just assume the elites have bad intentions towards the country as a whole.

Consider the economy. Too few people are working. Pay* has been stagnant for years, except that in the last five years median income has been going down. Food stamp usage is up dramatically; food banks say they’re seeing record demand.

So what does the President want to prioritize? Taking away guns from law abiding citizens and “immigration reform”. The latter is truly a sick joke. We don’t have enough jobs for all us citizens that want work, so let’s import a few tens of millions more low-skill Third World peasants and give them the vote. From what I’ve seen they don’t even want to become Americans, they just want to turn America into another version of whatever shitty country they came from in the first place. (I’ll ask it again: If Mexicans are so great, why are they all trying to get away from a country that’s full of Mexicans? If Haitians are so great, why is Haiti a shithole? Questions that no one ever answers honestly, and usually no one tries.)

But please, give them the vote, Marco Rubio and John Boehner, we need more fucking ‘cultural vibrancy’ from these ‘natural conservatives’!

More people to crowd the job market, more poor people to drive down wages. We can assume our leaders are totally stupid (not entirely unreasonable, I grant), or that they are the world’s greatest fools, or that they actually have bad intentions to the majority of their subjects. (And believe that these arrogant pricks see us as subjects. If you’re not one of the elite, fuck you.) Which one of these seems most likely?

Note that for the Dems their immigration policy doesn’t even jibe with their own stated policies on climate change or education. If education is so damned important, why are we importing ignorant people? If climate change is so damned scary, why are they trying to create more First World citizens, whose carbon usage per capita is generally much higher than that of the countries they’re coming from? Oh, and I forgot, the God-Emperor also wants to make climate change a priority, and we know what that means: driving up the cost of economic activity. That’s going to help! Hey, President Fuckhead, how about fewer trips back and forth to Hawaii? Your fleet of jets is doing a helluva lot more to create ‘climate change’ than my eleven year-old Camry, not to mention all the fucking armored vehicles that go everywhere you go.

(And am I the only person that remembers the first President Bush actually opting for a smaller jet for travel in-country, with the end of the Cold War? That went right out the window once Clinton was sworn in.)

I could go on, but why bother. But try it as a thought experiment for a few days. Assume the leaders of the country have bad intentions towards the citizens as a whole so long as they and their closest allies make out like bandits. Don’t just do it for one side or the other, do it for both. Assume that their interests aren’t always the same, but you can still see some overlap on actual policy from time to time. Just try this thought experiment for a few days, jan, and see how well everything starts fitting together. I’m sure you’ll find it edifying and disturbing in equal measure.

* And spare me the total compensation bullshit. I’m likely to use no more healthcare this year than I did twenty years ago, but it’s cost me a helluva lot more to be insured.

Icepick January 22, 2013 at 1:34 pm

If education is so damned important, why are we importing ignorant people?

And before someone brings up some completely disingenuous example of some Chinese PhD student who can’t stay in country: Spare me. We don’t have an immigration problem because we’re being flooded with twenty million Chinese STEM PhDs who want to stay in country and are being kicked out. (If only!) We’ve got a problem with Mexicans especially, but also with immigrants from elsewhere in Central America (some ridiculous portion of people from Guatemala actually live in the USA now) and the Caribbean Basin.

Dave Schuler January 22, 2013 at 1:37 pm

jan, a lot of what is happening makes more sense if you just assume the elites have bad intentions towards the country as a whole.

I honestly don’t think that’s the case. What I think is the case may even be worse. The people in charge of making policy have so confused their own good with the good of the country that they really think that the lousy policies they put in place are good for the country rather than just good for them. Add to that the presumption that the guy on the other side of the aisle is evil and it’s enough to explain many of our problems.

Dave Schuler January 22, 2013 at 1:51 pm

Icepick, you bring to mind something I hadn’t considered before. Annually, remittances sent by Mexicans working in the United States back to Mexico amount to about $20 billion. For a country of about $15 trillion GDP , that’s a little more than .1%. Not a huge amount but something. I wonder if the Powers That Be realize that’s reducing GDP? When growth is robust it’s insignificant but when growth is as phlegmatic as it has been it becomes more meaningful.

Icepick January 22, 2013 at 1:57 pm

The people in charge of making policy have so confused their own good with the good of the country that they really think that the lousy policies they put in place are good for the country rather than just good for them.

So you’re arguing for the stupid/fool theses. Granted, listening to Vice President Aneurism speak that isn’t completely unbelievable. But it doesn’t speak well to the major institutions of this country from the Ivy League to Wall Street that this is what we’re getting. Remember, these are the ‘TOP MEN’ (and ‘TOP WOMEN’, of course) that have risen to the top.

An interesting side note: There’s not one single bastard in DC these days that I voted for. In fact, there’s not one single person in elective office these days at any level that I voted for. Not one! I’ve been blanked at every level now. So don’t blame me for this bullshit.

Dave Schuler January 22, 2013 at 1:58 pm

If education is so damned important, why are we importing ignorant people?

Education is important if you assume a) that we’ll continue to import ignorant people and b) those you’re trying to educate are educable.

Icepick January 22, 2013 at 1:59 pm

Schuler, I’m more worried about wage stagnation and suppression of innovation than I am remittances. I’m also worried about tearing the culture completely off its moorings.

Icepick January 22, 2013 at 2:03 pm

Education is important if you assume a) that we’ll continue to import ignorant people and b) those you’re trying to educate are educable.

Let me rephrase that: Education is important if you’re getting paid by the education/educational college complex.

As for your (b), there’s plenty of evidence that such efforts hit a dead-end two generations in with regards to Mexican immigrants, and at a low level. But we’re not allowed to mention such things.

Dave Schuler January 22, 2013 at 2:09 pm

So you’re arguing for the stupid/fool theses.

Not quite. There’s a trick of the human mind that encourages people to think they’re in the right even when they’re not. Self-justification. Rationalization. Something. It’s how salesman operate. I think that OJ really believes he didn’t do it.

More delusional than foolish or stupid.

Drew January 22, 2013 at 2:12 pm

“I think is the case may even be worse. The people in charge of making policy have so confused their own good with the good of the country that they really think that the lousy policies they put in place are good for the country rather than just good for them.”

In my more reflective moments I probably conclude that this is largely so. However, I have personal experience with a number of pols who are perfectly capable of plain and simple venal acts and snicker the whole way.

In Milton Friedman’s ‘Free to Choose’ he begins a chapter with a quote to the effect of ‘beware most of men of zeal.’ Truer words were never spoken.

Dave Schuler January 22, 2013 at 2:13 pm

there’s plenty of evidence that such efforts hit a dead-end two generations in with regards to Mexican immigrants

It’s not limited to Mexican immigrants. IMO about 50% of the people might be able to benefit from a college education and about 20% from post-graduate education. You can spend as much as you want without accomplishing more than that.

What about the other 50%? And what about the people who won’t stay in school even if they might benefit from it?

jan January 22, 2013 at 3:12 pm

“An interesting side note: There’s not one single bastard in DC these days that I voted for. In fact, there’s not one single person in elective office these days at any level that I voted for. Not one! I’ve been blanked at every level now. So don’t blame me for this bullshit.”

Icepick,

Boy do I relate to that statement!!! My vote seems to be futile, as there are so many other votes out there, uninformed ones, that invalidate mine. Even in the most superficial conversations of what is going on out there, people are wide-eyed with responses of, “Gee, I wasn’t aware of that!”

steve January 22, 2013 at 4:36 pm

“The poorer people are the more likely they are to vote for the Democrats.”

The poorer people become, the more likely they vote out the ruling party. Poli sci 101.

Steve

Icepick January 22, 2013 at 4:50 pm

More delusional than foolish or stupid.

I think we’re arguing semantics at this point.

But then how does one explain people like Nancy Pelosi’s father, who was openly and proudly corrupt? Or Dan Rostenkowski, I believe it is, whom you’re always quoting about just showing them his business card? Or the guy with the cash in his freezer? Or … or … or …. At some point these jokers can’t really believe that they’re in the right, or they wouldn’t be trying so hard to hide things.

Icepick January 22, 2013 at 4:52 pm

The poorer people become, the more likely they vote out the ruling party. Poli sci 101.

Riiiiiight. That explains why black people voted overwhelmingly against Obama, given that there UE rates have gotten so high and their net wealth is deteriorating. Or why Chicago blacks in projects always vote for guy running against the mayor. Or … or … or ….

But what’s the point. You believe it, despite any evidence to the contrary. Let the rationalizations begin!

Icepick January 22, 2013 at 4:53 pm

At some point these jokers can’t really believe that they’re in the right, or they wouldn’t be trying so hard to hide things.

Obviously I mean the ones who are hiding things, not the ones that brag about.

Steve Verdon January 23, 2013 at 1:16 pm

Not quite. There’s a trick of the human mind that encourages people to think they’re in the right even when they’re not. Self-justification. Rationalization. Something. It’s how salesman operate. I think that OJ really believes he didn’t do it.

More delusional than foolish or stupid.

I’d like to believe this, but I keep recalling this:

Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority, still more when you superadd the tendency or the certainty of corruption by authority There is no worse heresy than that the office sanctifies the holder of it.

And considering that we have made a cult of the Presidency that quote seems even more applicable.

Consider that many politicians in Congress become rich once they obtain said office. Obama is a good case study. Two year after getting into office his net worth hit $1.3 million 2007). Two years later $5.5 million. Now his estimated net worth is around $10 million. If we assumed that in 2005 Obama was worth $750,000 this means that in 7 years he has earned over $9.25 million. His net worth has increased 1,333%.

Maybe to solve our money problems we should have Obama hold onto 1 years tax revenues for 7 years.

Icepick January 23, 2013 at 1:48 pm

There’s a trick of the human mind that encourages people to think they’re in the right even when they’re not.

It occurs to me that it would be simpler to suppose that sociopaths are in charge.

Steve Verdon January 23, 2013 at 2:45 pm

It occurs to me that it would be simpler to suppose that sociopaths are in charge.

When in doubt go with William of Ockham.

Icepick January 23, 2013 at 4:10 pm

When in doubt go with William of Ockham.

That’s all I’m sayin’.

PD Shaw January 23, 2013 at 4:33 pm

Personally I’m a fan of Robert Penn Warren’s All the King’s Men. The politician ultimately fails to be able to distinguish the public good from his personal interest, all the while finding doing bad to be necessary to do good. He has the protagonist muse that “Maybe a man has to sell his soul to get the power to do good.”

Leave a Comment

Previous post:

Next post: