Tag Archives: debt

Where The Unexpectedly Huge National Debt Came From

As we’ve seen before, in the year 2000 the Congressional Budget Office, which does official economic forecasting for Congress, predicted that by 2012 the national debt would be wiped out. What actually happened is that the debt increased five times over. To explain how that once-likely prediction became just another unrealistic dream, the left-leaning Center For American Progress broke down the numbers in a short video; of the 12 trillion dollar difference between projected and actual revenue:

  • 4.7 trillion (40%) went to extra Bush spending (wars in Iraq and Afghanistan, increased Medicare coverage, increased domestic security, debt repayment)
  • 3.3 trillion (26%) disappeared due to two economic downturns — the Internet bubble in 2001 and the real estate bubble in 2008
  • 2.3 trillion (20%) went to pay for Bush tax cuts
  • 1 trillion (8%) went to extra Obama spending (continuation of Bush tax cuts, new Obama tax cuts and other policies)
  • 0.7 trillion (6%) went to the 2008 stimulus to bail the country out

See also:

From YouTube, via FAIL Blog

Why We Absolutely Need The Fiscal Cliff, Or Something Like It

For several weeks, especially since the election ended, the media has been focusing its attention on the coming fiscal cliff. Most reporting talks about one thing: that the cliff will push the country into another recession. What very few stories mention is that the recession would be short, that it would balance the budget and set the economy up for expansion.

That is the opinion of the non-partisan Congressional Budget Office, which has been publishing economic projections for Congress since 1985. It puts out two scenarios: a baseline, in which the current economic policies continue, and an alternative, which considers other popular policies. Its latest publication makes it clear that the fiscal cliff is bad for the short term, but necessary for the long term. The alternative scenario, in which we avoid a fiscal-cliff-type of event, would have the public debt rise to 90% of GDP — levels unseen since WWII.

 

Source: The Committee For A Responsible Federal Budget. Credit: Lam Thuy Vo / NPR

 

The current debt level is at 77% of GDP  — the highest since 1950. If the fiscal cliff does happen, over the next decade that figure would drop to 58%, instead of rising to 90%.  (Which is still not good since, historically, it’s been around 40%.) Before that would happen, however, the economy would go into recession in 2013 and the unemployment rate would rise 9%. But, the next year, the economy would start to grow again, unemployment would drop to 5.7% by 2017, and further to 5.0% by 2022. Alternatively, without the fiscal cliff, says the CBO:

Ultimately, the policies assumed in the alternative fiscal scenario would lead to a level of federal debt that would be unsustainable from both a budgetary and an economic perspective. — From “An Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022“, by CBO

Austerity measures are desperately needed, and it’s quite amazing that a do-nothing Congress as polarized as this one was able to pass a pretty good solution to our budgetary woes in the form of this fiscal cliff. But it’s clear that even it won’t be good enough: the national debt needs to drop even further. This becomes obvious after realizing that the fiscal cliff provides only 0.5 trillion extra funds, on a 4 trillion dollar budget. Ten years ago, the budget was 2 trillion. Five years ago, almost 3 trillion. The fiscal cliff would see that 4 trillion dollar budget shrink by just 2.5%, when it really should shrink ten times as much.

When Clinton left office in 2000, public debt was projected to be zero in 2012 — instead it multiplied five times over. If Congress and the President come to an agreement to avoid the fiscal cliff, it should be only to make even deeper budgetary cuts.

See also:

From CBO and NPR

The US Budget Deficit Explained

 

Via Uber Humor

Get Ready For A New Conspiracy Theory

NPR has an article about an economic report from the year 2000 that pretty much foresaw a collapse of the global economy if America ever paid its national debt. And back then, when the economy was booming and there was a budget surplus, it looked like the US would be debt-free in 2012.

The problem with that scenario would have been that the government would no longer sell Treasury bonds (since the proceeds from those sales goes to pay debt), which would probably be catastrophic because much of the national, as well as global, economy is built on those bonds sales. For example, a lot of investors buy bonds because they’re an extremely safe investment: the US government will likely never default on its debts. And pretty much all interest rates are in some way tied to the yield on Treasury bonds. And the government uses bonds to try to steer the economy in one way or another. No more bonds means no more safe investments, the foundation of the interest-bearing banking system collapsing, and no way for the government to control the economy.

The all-seeing eye on the dollar bill

 

Luckily for the global financial system, that scenario never played out, and instead of being debt free by next year, it now looks like the US will be lucky to ever get back down to a manageable debt level. In other words, Treasury bonds and the modern economic structure are here to stay for as long as anyone can tell.

But any conspiracy theorist worth his salt would look at the way recent history played out and say there was no luck about it and that in fact, this is what actually happened:

  1. The Illuminati (or whomever runs the world from the shadows) saw the report forecasting a debt-free America and the subsequent collapse of the financial system that keeps them in power.
  2. They realized that for that system to remain in place, America had to be plunged into such enormous debt that it would take decades to recover.
  3. For that kind of enormous debt, the country would have to make deep cuts to revenue and massive spending increases.
  4. So they struck a deal with Bush & Cheney and got them elected by coercing the Supreme Court into its landmark decision on the Presidential election in 2000.
  5. They made 9/11 happen in order to bring the US into a state of perpetual war on terror, which would take monstrous amounts of perpetual funding. As a happy coincidence, it would also limit freedom in the name of security and significantly increase federal police powers.
  6. The Bush administration introduced massive tax cuts, supposedly to recover from the Internet bubble, but really in order to cut revenue.
  7. It then invaded Iraq, knowing it would cost untold amounts of money before the war was over.
  8. The Fed cut interest rates to record lows, again supposedly to help the economy grow, but really to create the real estate bubble that would lead to the collapse of the stock market, followed by high unemployment, followed by a bigger decrease in tax revenue on top of the existing tax cuts.
  9. For good measure, the administration also spent money wherever else it could: increasing entitlements (mostly Medicare), federal subsidies, education and discretionary spending.
  10. All told, the second Bush administration vastly increased federal spending while at the same time lowering taxes, leading to the enormous debt devised in step 2.

The government lost money every single year in which the Bush administration created the federal budget: 3.5 trillion dollars total. Federal spending almost doubled from 1.8 trillion in 2001 to 3.5 in 2009. Over the same period, federal tax revenue shrunk: from 20% of the economy to 18%; in dollar amounts, it went from 2 of the 10 trillion dollar economy (by GDP PPP) in 2001, to 2.5 of a 14 trillion dollar economy in 2009. The result: instead of shrinking to zero from 2000 to 2012, the government debt more than tripled, from about 3 to over 10 trillion.

 

So there you have it: ten easy steps to keep the Illuminati in power by creating enormous American debt in eight short years. The movie version should be riveting.

Update: the New Scientist has a well-timed article about a Swiss study that found, among the world’s companies, a network of some 43,000 interconnected transnational corporations, 1318 of which control about 80% of global revenues. Of those, an even more tightly-knit “super entity” of 147 corporations (mostly banks) control 40% of the network’s wealth; they include JP Morgan, UBS, Merrill Lynch, etc. The Occupy Movement would call them the 1%; conspiracy theorists would probably call them the Illuminati; the Simpsons would call them the Stonecutters.

From NPR