Wednesday, July 13, 2011

Get used to this new reality - no money for discretionary spending

When you run the numbers on the revenue coming in to the government in August, it's clear that the government could pay the bills for mandatory spending.
Here are the facts, as reported by MarketWatch and the Bipartisan Policy Center. You do the math:

* The federal government receives approximately $200 billion in revenues each month.

* Interest on the national debt in August will be approximately $29 billion.

* Social Security will cost about $49. 2 billion.

* Medicare and Medicaid will cost about $50 billion.

* Active duty military pay will cost about $2.9 billion.

* Veterans affairs programs will cost about $2.9 billion.
The problem is when we come to the discretionary spending. There would be only about $39 billion left. Mark Tapscott acknowledges what would have to happen there if the debt ceiling increase impasse is not resolved in August.
If you've been punching buttons on your calculator, you know that still leaves $39 billion each month. This is where Obama and the Democrats most fear to go. If Congress doesn't agree to raise taxes and the national debt limit, they will then have to make the tough choices about which of the remaining programs gets paid or cut and by how much:

* Defense vendors

* IRS refunds

* Food stamps and welfare

* Unemployment benefits

* Department of Education

* Department of Housing and Urban Development

* Department of Justice, etc. etc.

In sum, federal spending would have to be cut about 44 percent. For more on this, go here and here.
So there is no need to default on our debts or to starve granny. However, there would be difficult and tough choices that would need to be made on the rest of the spending. We'd see all those stories that we saw back when Gingrich and Clinton were facing off over the government shutdown of families who'd saved for their once-in-a-lifetime visit to Washington, D.C. only to find the Smithsonian closed. We'd hear about the employees in the federal bureaucracy who were facing unpaid days off just like much of the rest of the nation's employees have faced in the past few years. Of course, like last time, they'd get their money for those days paid retroactively.

Well, we better get used to it. Because this is where our budgets will be if we don't do something to trim mandatory spending. Just look at where we're headed if nothing is done.
It gets worse if you extend the prediction out further. And that is about what we have to contemplate in this little exercise about what to do with August's revenues.

Of course right now the executive branch has a lot of discretion on deciding what would get paid and not paid if the debt ceiling is not raised. But we can imagine a bill going through Congress to mandate that the President pay interest on the debt, Social Security, Medicare, and military pay plus veterans' benefits first. And zing! we'd then be facing in a few weeks the reality of what we'll be living with in twenty or thirty years. Here's another look at what our future will look like.
So if you don't like that picture and you don't like the thought of trying to fund all our discretionary spending out of about 20% of August's revenues, you should support reforms to change the trajectory that we're on. We can't afford the massive entitlement addition to mandatory spending that Obamacare represents. We need to enact true reforms to cut Medicare and Social Security spending. In short, we need to cut the size of the federal government. It is unsustainable for the future.

And the situation we're facing now, is the reality we'll be living with in a few decades. Get used to it.


LarryD said...

Title III judges compensation can't be reduced during their term in office (U.S. Constitution)

I've been arguing for a while that the House ought to start passing the budget piecemeal, in priority order.

1. Title III Judges compensation
2. Principal and interest due on the national debt
3. Social Security, Medicare, Medicaid
4. Military pay and benefits.

Then the fighting really starts over whats left. When the money is gone, stop spending.

It should be no surprise that I think that HUD and Dept. of Ed. should be abolished.

equitus said...

I've been wondering about just this sort of prioritizing of expenditures if the debt limit isn't increased.

I hear so many pundits saying we face fiscal calamity if we default on our borrowing, and of course we'll default if the limit isn't increased. And then they go on to use these "facts" to say that Tea Partiers and candidates like Bachmann are insane for opposing the increase.

I wonder why they are missing this point. Sure, many are trying to spin for bigger government, but I also hear right-of-center fiscal commentary saying the same things.

So Cal Jim said...

"...and of course we'll default if the limit isn't increased."

Excuse me, equitus, but the whole point is that the USA will NOT default on its debt payments if the debt ceiling isn't raised. Haven't you been paying attention? Revenues coming in are more than enough to make our debt payments and to pay our military and make social security payments, etc. What we WON'T have money for is things like ObamaCare, high speed railroad subsidies, and worthless departments like Education and HUD. Unfortunately for Dhimmicrats, they get their illegal slush funds from these areas of discretionary spending. That’s why they’re fighting so hard to keep the money flowing. It has nothing whatsoever to do with default and fiscal crisis but everything to do with their party’s financial well being.

pumping-irony said...

Close HUD and the Dept of Ed. Good riddance.

tfhr said...

I nominate the Commerce Department, the Department of Agriculture, the EPA and a serious down size for the IRS. A flat tax will make tax collection much simpler.

I'd settle for a 10% across the board budget reduction of every single federal government office. If they want to stay in "business" they'll have to find a way to trim their respective budgets. Here's another money saver: STOP printing official government documents, forms, and written materials of any type in any language other than ENGLISH if it is intended for use inside the United States of America. That would save quite a few pesos, amigos.

equitus said...

So Cal Jim: Yes, I got that and I agree with you. I was using very poorly constructed sarcasm. Sorry about that.