Jimmy's Sobering Look at Budgets - Part 3

Me Knows Better Than to Say This… but I will.   OK – Jimmy did the math assignment on taxes and it turns out we can’t tax enough to break even.  So much for millionaires and billionaires paying their fair share.  It will come down to taking everything the average American earns in order to balance the yearly spending explosion.  If you are starting here, you need to go back and read Parts 1 and 2.

In case you missed them, a quick review: 

Part 1 – The Household Budget comparison - http://meknowsbetter.blogspot.com/2012/10/jimmy-hits-skid-row.html

Part 2 – The case for higher taxes-

http://meknowsbetter.blogspot.com/2012/10/jimmys-sobering-look-at-budgets-part-2_25.html

Now it’s time to look at the spending side of the equation.

Spending:

Even if the government had received the $375 Billion (remember the extra Revenue we had before the Great Recession) to bring us back to 2008 income levels, the facts show that we actually spent an extra $836 Billion on top of what we spent in our baseline year of 2008.  See the difference between the two white lines.  I assume the green area would have filled in the red area to just below the bottom line if the economy had returned.  Then we would have kept the same shortfall of $458 Billion with the same differential red gap to compare the current administration with the prior.  Not the best scenario, but I used it only for illustration purposes to prove that we are spending money like drunken GAO workers at a convention in Las Vegas… not to insult sailors.  http://www.federaltimes.com/article/20120416/DEPARTMENTS07/204160301/GSA-scandal-Heavy-fallout-expected

Stimulus:

OK, I grant that in 2009 we decided to spend extra to jump-start the economy and bail out about everybody the government wanted.  This was a one-time $787 Billion package - right?  But it appears we have been spending that same additional amount each year - for the last 3 years.  If it were a one-time shot in the arm, we would have seen a spike in the chart and leveling back down to around 2008 levels.  Unfortunately, government does budgeting from the prior year and then continues the increases from that new baseline… remember that old adage in government – “use it or lose it.” 

The Cost of War:

So I know that some people say the reason for the 2011 deficit of $1.65 Trillion (or $1650 Billion) is the cost of the wars in Iraq and Afghanistan.  Well the cost of war in 2011 totaled $171 Billion.  This is only 10% of the deficit.  We are then spending the equivalent of 9 more wars at the same time and no one is talking about those.  Some like to claim that the cost of war is over a Trillion dollars… true, but misleading because they don’t tell you it is the total cost over 9 years.  The average over this time is $140 Billion per year.  Removing $171 Billion of spending would be great, but still nowhere close to what we need to cut the yearly deficit.  For a good summary see: http://www.infoplease.com/ipa/A0933935.html

Oil Subsidies:

We hear a lot about a proposal to stop providing subsidies to big oil.  That should balance the budget – those Enron/Exxon bastards should pay up.  As much as the current administration demonizes big oil – this should be really big.  It turns out according to the Obama administration that the oil subsidy loophole would save… wait for it… $4 Billion per year.  http://www.nytimes.com/2012/03/02/us/politics/obama-calls-for-an-end-to-subsidies-for-oil-and-gas-companies.html?_r=0

Or see this:

http://www.heritage.org/research/reports/2011/05/whats-an-oil-subsidy

And while we are talking about subsidies… is this really a subsidy?  Some define a subsidy as when the US Treasury pays directly to a group… like they do farmers.   I think what they are referring to is really a tax deduction or tax credit like many businesses get.  But if we are going to group tax breaks with subsidies, then everything should be included.   Remember, there are tax breaks for farmers, ethanol producers, teachers, General Motors for the Chevy Volt… everybody gets some type of deduction or credit - even home mortgages are “subsidized” then.   Of course subsidy or tax break… does it really matter?  It’s still a lot of money, but let's call it what it is... a tax break. 

Green Energy Subsidies:

If we are going to complain about oil "subsidies," then how about a little equal time on the Green Energy "subsidies" and do a quick comparison.

http://www.nypost.com/p/news/opinion/opedcolumnists/the_prez_oil_tax_break_lies_Y2Yj6KCU9QIO0BKHs1Be7M

In an article in the NY Post, it is claimed that Solar and Wind get $12 Billion in subsidies.  Uh?  We complain about the breaks big oil companies get in tax deductions, but don’t even mention anything about Green Energy getting a bigger tax break.  So what the hell…  $12 Billion vs. $4 Billion?  Three times as much?  How about we drop them both and let the economic conditions pick the winner and save the taxpayers $16 Billion a year?

Oh… but on top of the subsidies, the Green Energy companies also received a little bonus money in the form of Loan Guarantees from the Department of Energy under the Recovery Act of 2009 to fund various “stimulus” projects.  Ah… more money no one wants to talk about.  It couldn’t have been that much right?

Solar Companies Defaults:

It turns out that the stimulus provided an additional $19 Billion in subsidies under the Recovery Act (remember, this is on top of the $12 Billion subsidies / tax breaks) to Solar, Wind, Geothermal, and Transmission companies.  This was just one part of the $90 Billion invested in Green Energy projects – the other 20,000 projects are extremely hard to track – even for the government so I won’t try.  Then to make matters worse, these same Energy companies, which took the money ($19 Billion), weren’t very good investments and many went bankrupt or are about to.  

At my last count, there are 23 companies that squandered $3.2 Billion from this program that went bankrupt with many more companies faltering with another $5 Billion at risk when the solar energy boondoggle finally collapses.   Good news - the actual loss could have been much worse.  Solar Millennium LLC was approved under a “Conditional Release” by the Department of Energy to receive $2.1 Billion, but they went into bankruptcy just before they could get the money.  Lucky us. 

Obvious Conclusion #5:  WTF?  Is anyone out there telling the truth?

Summary:

OK – so what do you think?  It’s not a pretty picture.  It appears from this analysis, taxing the filthy rich, the somewhat rich and the corporations into oblivion still won’t get the budget balanced.  We could take all the money they earned and it would just pay the deficit for one year… and then we would have to do it again the following year unless we decided to actually cut spending.  

It looks like the politicians we elect need to determine which programs should be cut in order to bring us back in line.  We had a huge increase in spending which has not come back to a baseline.  If we can get the economy going and people paying taxes on higher earnings, we could make a dent in the figure, but it still won’t come close.  I guess it is time for the politicians to do what we elected them to do… finally make some tough decisions.  Good luck.