Tuesday, January 27, 2015

Ever Wonder Why We Can't Just Solve Some Of Our Biggest Problems?

You should see how hard it will be
to get a budget done this year
Such as infrastructure, for example.

The United States has close to 63,000 bridges that need to be repaired or replaced. Some estimates place the cost of such repairs and replacements at over $1 trillion. Some experts think it far exceeds that amount.

That number may sound excessively large when viewed in isolation. In truth, it 'only' represents 10% of all bridges in existence in America today which number close to 650,000 bridges across this great land of ours.

Just think about that the next time you cross some long bridge that looks like it was built before the 21st century. Especially in Pennsylvania which has the most deficient bridges in the country. Do you feel 'lucky' passing over the one you are driving on, or not?

Here's some facts to keep in mind as you start to see the US Senate go back into 'regular' order after 6 years of doing very little under Democrat Majority Leader Harry Reid. The Senate has already considered 15 amendments to bills in the last week or two alone in January 2015. They considered 15 amendments on the floor of the Senate...during the entire YEAR of 2014 under Harry Reid.

Remember that our federal budget today is just over $4 trillion. We still borrow close to $500 billion per year over and above what we take in in federal tax revenues from all sources. The GDP of America is just $16.9 trillion in 2014.

Spending $1 trillion on infrastructure improvements would represent a significant claim federal government resources. Whether it is spent all in a couple of years or spread out over the next 5-10 years, such spending would crowd out other much-needed and desired investments across the board.

When you also consider that the federal gas tax is providing less and less revenue to the highway trust funds over time due to more and more fuel-efficient cars, either a new funding source has to be found or other programs have to be cut to pay for such a massive amount of spending on new highways, roads and bridges.

If you are an advocate for any of the following issues, you have a stake in how our budget is set up; run and funded:
  1. Education
  2. Environmental Protection
  3. Defense
  4. Tax Cuts
  5. Homeland Security
  6. Science and Tech
  7. Housing
  8. Welfare
  9. 'Free' Community College
  10. Research Funding
Why do we bring this up?

Because the totality of our federal budget and national debt is something that never gets brought up in the press or on talk shows, cable shows or in polite conversation with people with whom you tend to agree.

We are today now paying for the decisions past Congresses and Presidents have made by not having the flexibility and the discretion to make decisions in the national interest no matter how important they are to the future of this country.

In essence, we have 'purchased' a $18 trillion national debt since 2000 and not used any of it to rebuild our national infrastructure which has been done in the past to improve our economic output, the Erie Canal being just one obvious example. Or any other major national investment.

President Obama may really want everyone to have 'free' community college for everyone but that is not going to happen with the GOP controlling both the House and the Senate with him asking for higher taxes to pay for it. They certainly are not going to stop funding homeland security or defense or housing to free up the funds for his proposal either.

The discretionary budget of the United States has fallen roughly 7% relative to GDP over the past 2 decades. Where has that money gone?

To Medicare and Medicaid. Our two largest federally funded health programs have grown massively in absolute dollars per year and in relative share of GDP over the same time period.

We have funded 2 wars in Iraq and Afghanistan that totaled at least $1 trillion from 2002 to 2013. The vast majority of that came from deficit-funding through supplemental appropriations bills that occur during the middle of legislative sessions mid-year where they could be passed without having to be included in the annual budget process.

President Bush and the GOP Congress passed the 'temporary' Bush tax cuts that President Obama made permanent in 2013. So both of them now 'own' the tax cuts that so many people decried during President Obama's 1st and 2nd presidential campaigns.

All of these have contributed to add to the $18 trillion national debt we now own lock, stock and barrel. That national debt, and the debt service we will sometime soon owe on it, pretty much make it almost impossible to do anything on even a semi-grand scale to address the big problems we face today in America.

In other words, we have painted ourselves into the proverbial corner. Just as every prudent politician and economist said we would as far back as 1980 when Ronald Reagan started pointing out the dangers of running continuous budget deficits.

As we have pointed out many, many times before, the real danger is not in the absolute amount of the national debt at the current time. We have survived many other explosive periods of national debt at critical times in our national history, mostly during major wartime efforts.

The real skunk in the woodpile will be when interest rates return to their more 'normal' rates of interest, say 5-6%, way up from the 2%+ interest now being paid on the national debt.

When the national debt hits $20 trillion before President Obama leaves office in 2017 perhaps, and when interest rates hits just 5%, the annual interest cost will be $1 trillion. Per year. And growing.

$1 trillion of your taxpayer money going out as 25% of the national federal budget each and every year will dry up every available dollar for the programs you may want to see funded and then some. We need bridges to be rebuilt and, at a very minimum, all of our roads need to be re-paved but that can't be done with such pressing interest costs staring us in the face.

Same with community college tuitions. Or environmental protection. Or any of the programs you may like a lot and think are very important to the country and people.

Just keep some of these thoughts in mind as we start to see action in Washington DC unlike any legislative activity we have seen in the last 6 years.

We hope they work it all out. But it is going to be a tough slog for everyone from President Obama to Majority Leader Mitch McConnell to Speaker John Boehner to you the American voter.

There are no easy choices left to make. They are all going to be very hard and very difficult to make.
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