Taxes vs Spending: Where do we really stand?

The other day I was thinking about one of the cornerstones of President Obama's campaign platform.  Specifically, I was zeroing in on the notion that that, "The Rich need to step up and pay their fair share".  I wanted to figure out exactly what a fair share is?  If we break things down and go by the numbers here is where we stand today.

Federal Tax Revenue 2011- $2.3 TRILLION
Federal Expenditures 2011-  $3.6 TRILLION
Federal Deficit           2011- $1.3 TRILLION
Current Federal Debt 2011- $15.1 TRILLION
Current US Population:      - 311,591,917

Let's see what interesting things we can do with some quick math.

Federal Revenue 2011 -$7,381/person
Federal Spending 2011 -$11,533/person
Federal Deficit  2011 -$4,172/person
Federal Debt 2011 -$48,460/person.

I hear many people blame much of our current debt/deficit situation on the wars in Iraq and Afghanistan.  Wars have to be obscenely expensive so let us see how much better of we'd be if we ended them both immediately.

Iraq and Afghan War spending 2011 - $170.7 BILLION
Total Spending Since 2001               - $1.29 TRILLION

Federal Expenditures 2011 (minus wars) - $3.42 TRILLION
Federal Deficit 2011 (minus wars) - $1.12 TRILLION

Ok, that didn't do much to help our situation.  We are still spending over a TRILLION more than we took in via Taxes.  Let's visit Taxes now.  Let's use President Obama's plan of letting the Bush Tax cuts expire for those making over $250,000/year.  According to the CBO letting the tax cuts for the rich expire will bring in $829 BILLION in new tax revenue over the course of the next 10 years.  If we break that down that means $82.9 BILLION a year.  Lets add that to the money we're saving by getting rid of the wars.


Federal revenue with Obama Tax plan - $2.382 TRILLION
Federal Expenditures 2011 (minus wars) - $3.42 TRILLION
New Federal Deficit                                - $1.038 TRILLION

I double checked the math folks.  Even with the Wars both over and the Bush tax cuts expiring for the rich, we still haven't gotten below a $1 TRILLION deficit.


Now we are hopefully starting to see the gravity of the situation we are in.  We've enacted the two biggest parts of President Obama's campaign platform that would either cut spending or increase revenue to the Federal Government and we would still have had over a Trillion more in cuts before we would manage to break even.  I'm not going to pretend that Mitt Romney's plans would have done any better than this, because I don't think that they would have.  We as a country have to face the reality that drastic changes are going to need to be made if we want to avoid going the way of Greece.  We have to take a serious look at the way we handle both spending and revenue.

President Obama has a tough road ahead of him.  He doesn't have the dot com boom (which helped the economy grow at a steady 4-5.5%) of the late 90's that grew the economy and helped boost federal revenue that Clinton had so he could balance the budget in his second term by bringing both sides of Congress together.  Instead President Obama has an economy that is growing at a rate of half of what Clinton saw.  The economy is also much much more fragile now than it was back then.

My own take on the so called fiscal cliff that the country is headed for is much more balanced that either the liberal side of Democrats or the right wing of  Republicans would like. The more liberal Democrats would prefer to try and tax our way out of debt by raising taxes on the rich and keeping the tax cuts for the middle income brackets in place They would likely want to eliminate many tax loopholes and shelters that the super wealthy often utilize. But then what? As stated above, just raising taxes alone wont be enough. 

On the other side of the isle you will hear from Tea Party Republicans and other right wing Republicans hell bent on continuing to deny the President any type of achievement. They would vote against continuing the middle class tax cuts independently of a broad tax cut package that keeps the rate for the wealthiest Americans in place. The President likes to use the phrase they are "holding tax cuts for the middle class hostage," and in effect that is what some of them are doing. They are also more prone to want to cut, cut, and cut government spending some more. Most of the proposed cuts would be on programs that the middle and lower income classes have come to depend and rely on. What my own mind thinks when I hear these types of proposals is that they want to turn everything back to the way it was when George W. Bush was president. While that economy might have been good for a select few for a few years, it ultimately ended catastrophically for most every average American. 

As always with these two political parties, the real truth is somewhere in between. I believe that we do need to allow the tax cuts for the top earners to expire, and I believe the tax cuts for the middle income earners should be extended for several years. It is often said by some Republicans that you cannot raise taxes in the middle of a recession. They will also say that you cannot raise taxes in times of economic prosperity because it may cause the economy to stall. If both are true then I guess you can never raise taxes, in which case you can never pay for government services for an ever growing population, for wars whose cost is and likely will never be fully known, for an aging population who will require health care assistance. These things cost money, and need to be funded somehow or another. I do not see the likes of Mitt Romney or George Soros lining up to pay from their own pocket the cost of veterans health care benefits as they return from war. And if we cannot both cut taxes and gut essential government programs to rid ourselves of this national debt problem, what can we do?

We can have a balanced approach with a shared sacrifice. There are plenty of government programs out there that are just wasting money. I know of many based on personal experiences in the military. There is a war that is winding down and can have the withdraw sped up to cut costs there and more importantly spare lives. There are tax breaks, shelters and loopholes that are entirely unnecessary and really do more harm to the economy and country than good. The super rich do not need private jet tax breaks. Outsourcing companies should not get tax credits for the cost of moving their businesses overseas. Able bodied Americans should not be getting government disability benefits based on fraud. The top 2% of Americans who have largely been unaffected by the recession should not have continued tax cuts that are shown to be more damaging to the economy than beneficial. Medicare and Medicaid are two of the most substantial forms of government spending, they need drastically overhauled and the President has his health care plan in place which intends on  accomplishing some of that but more must be done to get these two programs back to respectability. The defense budget should not be spent on unnecessary aircraft carriers, tanks, and other items that have little place in the 21st century of military combat. Wars should only be fought out of necessity and never by choice. 

It will take some cooperation from Congress and the President. It will take angry and determined American citizens. It will take time but ultimately the country can and will get out of this economic logjam. Hopefully sooner than later. 

Now that the dust has settled, what comes next?

It is now the Wednesday morning after the election and for the most part, nothing has changed.  Barack Obama has successfully won his bid at a second term in office.  The House is still controlled by the Republicans and the Senate is still controlled by the Democrats.  The all out visual assault of campaign ads will finally give way to normalcy here in Ohio.  The two party system did it's job again this year.  The top third party candidate, Libertarian Gary Johnson, brought right at 1% of the popular vote.  The question now is, where do we as a country go from here?

What needs immediate and intense focus from this point forward is the status of the Bush era tax cuts.  If something isn't done by Congress and the President before January 1, the entire country will see their taxes go up.  Make no mistakes that this is a dangerous plateau that if we step off of it will surely return our economy fully back into a recession.  If my quick calculations are correct, I can expect an immediate drop of take home pay to the order of about $375/month if the tax cuts are allowed to expire due to gridlock in Congress.  What needs to happen is that the President needs to rise to the occasion and find a way to bring Democrats and Republicans together to come to a solution to this problem.  The President doesn't have to worry about winning another election in his Political career at this point.  President Obama needs to be what the role of the President is meant to be, the leader of this country.

Mr. President, please let go of party lines and do what is right to keep this country from moving backward come January 1.

America has spoken again, and with few exceptions the votes were remarkably similar to the 2008 election. President Obama carried every state he won in 2008 except North Carolina. There are many reasons for this electoral college domination but as noted above, it is time to move forward and focus on what to do next as opposed to how he won re-election. 

The "fiscal cliff," is rapidly approaching and the American people have retained the same makeup of divided government we have had since 2010. They clearly are willing to elect a mixed government but no doubt will expect results this time around or my guess is they will throw a lot of incumbents out next election. The onus to govern is not solely on the President, Congress and the Senate must do their part as well. My assumption is that House Republicans will realize the serious consequences the nation faces if they continue to just play obstruction like they have the past couple years. I also believe they know that those tactics failed miserably. The fact that Senate Minority Leader Mitch McConnell states his number one goal was to see that Barack Obama became a one term president should ensure a selfish politician like that is never elected to public office again. McConnell and other Republicans operating a hostile form of government suffered an immense blow to both their strategy and their egos. I believe they will be more open to compromise this time around. I also hope and believe that the President will do the same. Together they can reignite the grand bargain that was rumored to be close to passing previously. Most Americans want a shared sacrifice, if Congress and the White House can manage to govern with that in mind then the next four years should continue to move the country back in the right direction. 

As an Obama voter I firmly believe that he was the right choice for the country. I also believe that he will be doing what all second term presidents do- ensuring his legacy. I expect more long lasting legislation to be passed in the form of a grand compromise on the fiscal crisis we are facing right now, in the form of a mutually agreed upon immigration bill and more. Surely there will be many people unhappy with anything the President does from here on out. In four years, they can elect a new one. For now, its time to keep moving forward.