Wednesday, April 16, 2014

Austerity or posterity


I see we have another one of Mr. Longhofer’s “don’t worry, be happy” letters telling us the need for austerity is based on fuzzy math and we can spend with wild abandon and the economy will thrive. Mr. Longhofer’s position is that austerity is manufactured hysteria. Well let’s look at some basic math and the readers can decide for themselves whether it’s fuzzy or not.

Interest on our debt last fiscal year was $227,870,358,779.45. In fiscal 2009 the interest was $383,071,060,815.42. These numbers come from the Treasury Direct site of the federal government. The national debt was around $10.5 trillion in 2009 and around $16.7 trillion now. One might wonder how we could pay so much less in interest on today’s much larger debt. Simple, the Fed reduced interest rates to almost zero. For you and me this would be like having a 50 percent higher balance on your Mastercard but having a lower minimum payment. Basically this means that we have been able to heavily indebt our grandchildren without any current pain to us. Basically everybody on either side of the aisle agrees that we are rapidly approaching a $20 trillion dollar debt.

Historically interest rates have averaged around 4.2 percent. Even three percent would mean a $600 billion interest payment on $20 trillion. That’s almost $400 billion more than we are paying now. The left just had a panic attack on an $82 billion dollar sequester. What kind of cuts do you think a several hundred billion dollar hit would force? Remember all those nice federal programs that liberals along with others support? Some of them I’ll grant are very important. Well that big pile of cash paid in interest is money that can’t be used to support those programs. So then you have to either print a boat load of money (the feds are printing almost $3 billion a day now) or raise taxes to very high levels to pay for those programs.

So Mr. Longhofer is right, you don’t need to voluntarily do austerity now, but if you don’t, it will be done by force on your posterity.


Letters to the Editor


Discussion | 18 comments

  • James E.May 15, 2013 - 11:11 am

    Mr. Alger, no where in my letter did I say we can spend with wild abandon. My position is simply that austerity is wrong in a period of a slow economy. And thank you for your final paragraph noting we don't have to do austerity now. As for the future, the CBO reports that the 2015 deficit is projected at $378 Billion, a lesser figure that the 2009 deficit of $1.4 Trillion. So, don't worry, be happy, it's going to all work out.

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  • Ken SteersMay 17, 2013 - 6:45 am

    James, Austerity is never wrong when you are in deficit spending. Never in our lives or the history of man kind has anyone ever spent their way out of debt.

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  • cookie65May 17, 2013 - 7:59 am

    James says "austerity is wrong in a period of a slow economy". The few small business' that have managed to survive this obamaeconomy have done so by cutting back. The ones that haven't cut back are the reason for all the available commercial space in every town across America. Over the last half century the leftists have expanded government with wild abandonment, with no regard for the consequences of it. It bought them money, elections and power. They have burdened the producers with endless debt and then turned around and told the freeloaders that all of our problems are because the producers aren't paying their "fair share". If is true that we as a nation cannot survive without all of this government then we no longer are a nation of the people.

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  • cookie65May 17, 2013 - 10:27 am

    Here is just a tiny piece of the sleeze that needs to be the focus of austerity.

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  • Phil VeerkampMay 17, 2013 - 10:43 am

    I think that I'm through for the day. "Weiner Wife" has forced a re-boot. System down.

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  • Ken SteersMay 17, 2013 - 11:18 am

    The people who say the government can not have austerity measures in this obviously horrible economy. Are the same people who pushed for higher taxes on the business owners during the same economy. Also James the CBO doesn't project deficit spending to be at $378 Billion in 2115. I can't find anything close. But the do see a small trend down based solely on the re-institution of the AMT to middle class Americans as well as a tax increase on all Americans across the board.

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  • cookie65May 17, 2013 - 11:57 am

    If we cannot have austerity during the toughest of economic times then we can never ever have smaller government. If wasteful, deficit government spending saves us during bad economic times then it has to be that it will also cause a thriving robust economy to thrive even more. By that logic limited government is the worth thing for economic prosperity.

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  • cookie65May 17, 2013 - 12:23 pm

    *worst, not worth

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  • Ken SteersMay 17, 2013 - 1:01 pm

    PHIL? Wiener Wife or Whiner Wife? I now have the song Lola going through my head...

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  • Phil VeerkampMay 17, 2013 - 5:44 pm

    Ken, don't feed the beast! Stop!!! My boundaries are questionable.

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  • James E.May 17, 2013 - 5:59 pm

    Ken, Google "CBO estimated budget deficit." Number of various articles. The one I read indicated estimated 642B in 2013; 378B in 2015; 339B in 2017, but then will rise to 606B in 2022 because of baby boomers. All these estimated and will be out the window if we go to war or some other national emergency. Phil, who is this beast of WHOM you speak?

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  • Phil VeerkampMay 17, 2013 - 6:13 pm

    myself, James. ~~~hangs head in shame~~~

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  • Ken SteersMay 17, 2013 - 7:58 pm

    James these are CBO's new revised guesstimates for the future. But read there own paragraph as to why they make this projection. CBO’s estimate of the deficit for this year is about $200 billion below the estimate that it produced in February 2013, mostly as a result of higher-than-expected revenues and an increase in payments to the Treasury by Fannie Mae and Freddie Mac. For the 2014–2023 period, CBO now projects a cumulative deficit that is $618 billion less than it projected in February. That reduction results mostly from lower projections of spending for Social Security, Medicare, Medicaid, and interest on the public debt. $618 billion less mostly from lower spending for Social Security and Medicare? That's some major austerity cuts right there. The most I've heard cut for these two programs was the $500 billion medicare cut for Obama care. But that was over 10 years. Something doesn't seem right in these numbers

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  • James E.May 17, 2013 - 9:47 pm

    Ken, I agree that the numbers are questionable estimates. But, given the chained CPI is still in the talking stage I'm not sure how expenditures could go down for Social Security as more SS T Bills have to be redeemed for the baby boomers. Medicare costs could go down if hospitals are paid less, but would seem to have to go up for the baby boomers. All very confusing for us not schooled in the esoteric world of estimating future government costs.

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  • Phil VeerkampMay 17, 2013 - 9:52 pm

    LINK - Actuaries are well compensated.

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  • James E.May 17, 2013 - 10:05 pm

    Phil, good salary for counting beans. Oh, Phil, my recent comment about telling my wife to tell any Washington callers to call me back is true. I never get any calls from the president or Senator McConnell, but I do sometimes get calls from DC reporters trying to check out the validity of tidbits from the past. Sometimes I can help them, and sometimes I cannot as it is a compartmented world and I was only in a few compartments. I never get any calls asking my opinions about politics.

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  • Ken SteersMay 19, 2013 - 4:18 pm

    James, Same topic different story. Dr. Robert Williams shared the Second Interim (budget) Report results, which can be found online at “I want to take a minute to clarify, that having a qualified budget is different than having a positive budget, and having either does not mean we are going to cut more than we need,” he said. “As this report indicates, due to our declining enrollment, we would still need to make cuts, because we are deficit spending. As anyone who has lost a job and has credit card debt understands, eventually the money runs out. It’s like chasing a snowball down a hill.” I think the Dr speaks for all of us, who actually passed math...

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  • James E.May 19, 2013 - 5:32 pm

    Ken, you mention math. I was thinking earlier today about algebra. I have never, to the best of my knowledge and belief, used algebra outside of class in high school. I think it important to learn because it exercises the brain, but not sure that many people use it (unless it is a step to higher mathematics). As for the deficit, the higher our GNP, the less importance our deficits become. And, a prominent Republican (Richard Cheney) has said that deficits don't matter and we must give him his due. However, will our GNP continue to grow given China and India (the new big boys) could constrain our growth? Time will tell whether we will someday run out of money. Why don't we not set our hair on fire (Mr. Alger), and hang in see what happens over the next 50 years.

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