Grow local leadership, not the federal bureaucracy
Defend our freedom to choose
against the liberal insurgency in Congress.
Go figure. $1.5+ trillion stimulus to "create" 3 million jobs? Really?
February 11 update - We're now officially on
the road to serfdom as a $787 billion "deal" has been struck in
conference between the House and Senate versions of the "stimulus" plan.
Meanwhile, there is now talk of $2 trillion or more beyond the original
TARP bailout.
This is just the first roadside
bomb blast in this liberal insurgency. It's not the end of the fight.
The public will soon wake up to the danger of unchecked federal power to
spend us into a real financial catastrophe.
The
Obama administration has launched their initiative to approve and spend
a further $825 billion in addition to the $700 billion TARP stimulus
package previously approved, much of which has already disappeared
without a very clear explanation of what happened to it, or what it
accomplished.
Does your calculator handle a 1 with 12 zeroes after it?
Luckily, I have one of those nice HP financial calculators which handles
exponential figures.
Not
to mention a computer. You may have to widen the cells on your
Excel spreadsheet. A lot.
Anyway, do the math. For simplicity, let's round it to $1.5
trillion.
This
assumes, of course, that all of the usual government spending is
providing no "stimulus" already.
In
reality, the federal, state, and local governments already spend a
fortune on "job creation" ideas.
Update: $1 million a day ever since
Jesus was born
This
useful example has been cited by various commentators. If you
spent $1 million on every day of every year since Jesus was born, it
still wouldn't add up to $1 trillion. Think about it. There
have been fewer than 734,000 days since that time, so that's under $734
billion.
Even after the alleged "cuts" which a
few Republican Senators have now apparently accepted to buy their votes,
the stimulus bill (as well as TARP before it) still greatly exceeds that
amount. At election time, one can only hope that voters will still
remember who sold them out, and work harder to defeat them.
Math exercise #1 : Federal "stimulus"
per job "created or saved"
Divide $1,500,000,000,000 by 3,000,000 "new or saved" jobs.
Check your work carefully. You're right. That's $500,000 per
job.
Wow. Forget Wall Street.
I want one of those jobs. Any one of the 3 million of them.
Watch
for corrected "jobs saved or created"
figures soon, claiming more than 3 million are expected.
Even if you average this $500,000 over 4 years, that's
$125,000 per job. Talk about quality jobs. There's no way
that government can sustain this sort of additional spending.
Somebody has to pay for it. The nearly 200 million potential
workers (everyone aged 15 - 64), many of whom pay no income taxes at
all, are going to have to pay for all those $125,000 jobs to do whatever
the government is planning to do.
Yes, a large chunk of the plan may be "tax cuts" of
some sort, rather than direct government spending, in which case many of
the alleged jobs may be predicted to come in the private sector rather
than through new federal bureaucracy programs. After all,
government couldn't hire 3 million people that quickly, even at a high
salary. Where would they put them all? What would they
produce?
By
the way, "saved" jobs is a euphemism for claiming to have an impact
without being able to prove it. It assumes that, if it weren't for
this spending, those jobs would have been lost and that money would not
have somehow created a single job in any other way - such as by not
bankrupting us for generations.
Some
jobs will probably be created at the company which makes printing
presses for the US Treasury.
Extra credit: just for the fun of it
OK,
all you liberal environmentalists out there who like to measure the
hypothetical "carbon footprint" of everything we do on earth. How many trees will die to
print another $1,500,000,000,000 ?
Let's think
further about this for a minute. A dollar bill is about 6 inches
long. That's 750,000,000,000 feet of dollar bills from end to end.
That's roughly 142 million miles.
It's roughly 93 million miles from the earth to the
sun. It wouldn't quite be enough to do one round trip.
For perspective, the average distance from the Earth
to the moon is under 240,000 miles, so all those dollar bills end to end
would stretch roughly 600 times the distance to the moon. 300
round trips.
The speed of light is roughly 186,000 miles per
second. Stretched end to end, that means it would take light over
12 minutes to reach the end of the dollar bills for this $1.5 trillion
stimulus package.
Math exercise #2 : Federal "stimulus"
per working age adult
Now,
go back to your calculator or spreadsheet, and try this one.
Divide $1,500,000,000,000 by 200,000,000.
If
you check the
CIA World Factbook for the USA, under People, that's roughly the
total number of men and women in the country between the ages of 15
and 64, out of around 300,000,000 total. We'll assume for the
moment that we don't expect our senior citizens and children to be
paying this new bill.
That's right. It works out to $7500 for every American alive in
the 15-64 age group.
If
you read the fine print and the OMB estimates about the spending
program, it soon becomes clear that much of this won't actually be spent
for a few years.
Frankly, it's going to take a
few years to figure out how to actually dole out that much money in a
way which won't look like a total waste of money. They won't be
paying it all up front. They will need time to ensure that the
money goes to the groups they want to favor. Even if you "pay to
play", you can't cash in too quickly. It has to go through all the
bureaucratic procurement processes to seem defensible.
Math exercise #3 : Who pays for this
"stimulus"? How can they afford it?
Now,
do the math again. Not everybody from age 15 to 64 pays taxes to
the government.
The per capita GDP of the United States is around $48,000.
That's based on a roughly $14 trillion GDP and 300 million total
population.
If
you use the 200 million figure instead (everyone age 15 - 64), it's a
little over $70,000.
$7500 is an awful lot of additional spending for somebody who only
produces $70,000.
Especially when you consider that most of those adults are already
deeply in debt.
Not
all of those 200 million adults are actually working, either.
Non-working spouses, for example. Forget about the unemployment
statistics. That's hardly even significant digits in the total,
because it only measures those who report that they are seeking work,
and can't find it, to get social benefits. We still have a
relatively large number of households in which only one parent works to
support the family. We also have a lot of people in the 15 - 20+
age bracket who are in school, rather than working full time.
Now
consider that many of those 200 million people pay no federal taxes at
all.
By
some estimates, only about 60% of working Americans pay income taxes.
They
may "co-pay" something into Social Security or Medicare, but they pay no
income taxes.
For simplicity, let's assume that means 100+ million people are paying
most of the taxes.
In
reality, most of the taxes get paid by the top 5%, but let's skip that
inconvenient truth for now.
That means American workers produce $70,000 in GDP on average, but more
than 100 million of them are paying an average of $15,000 or more for
this new stimulus package, while the other 100 million adults who don't
work for a living are getting it as a free ride.
Wow. That sounds really fair to all the hard
workers of this country, doesn't it?
Don't we all agree that we want to go $15,000 more
into debt? Isn't it our patriotic duty as American taxpayers to
transfer more of our wealth through the government to benefit others?
Aren't we all convinced that investing in federal
government Ponzi schemes will pay off?
Don't we believe in the
Easter Bunny, and that these eggs don't have to come from some poor
chicken?
Aren't we all ready to worship the noble cause of
creating jobs through government deficit spending? I thought
Keynes was dead. I thought socialism was recognized as a failure,
as a proven road to serfdom as demonstrated in one country after another
for many decades now.
Math exercise #4 : What about our
personal debts? And state and local tax costs?
This isn't the only debt burden on those taxpayers. We are already
paying the full share on everything else which the federal government
spends - plus all the state and local costs too.
The federal government received roughly $2.5 trillion in tax revenues.
It is already expecting to spend roughly $3.0
trillion, and that's climbing fast now.
It already has over $12 trillion in external debt
(owed outside the country).
The public debt level in 2007 was already estimated
at 60% of GDP.
The state budgets are a disaster, especially but
not exclusively in the "Blue" states.
Check it out: National Association of State Budget Officers:
http://www.nasbo.org
Add up all the state budgets (not just the
shortages). Divide by 100+ million working taxpayers.
In
short, we are now forecasting federal budget deficits of over $1
trillion far into the future.
The states and
local governments don't have that luxury. They can only borrow so
much before nobody will want to buy their debt. The US Treasury
hasn't reached that point - yet.
Other countries have proven that "sovereign" debt is
not necessarily a safe investment. So far, we have avoided joining
that club. Foreign investors still believe in the value of the
dollar and US Treasury obligations as a safe investment. We can,
however, spend ourselves into a larger financial crisis.
I worked in Brazil during the hyperinflation era of
the late 1980s. This is not a risk we want to take. The bad
effects of this disease of excessive federal spending and foreign debt
are not immediately obvious. It takes years for an economy to get
really bad, as President Carter proved with Ford's recession.
Did anybody else save their "WIN" buttons from that
era? (Whip Inflation Now)
Forget about "double-digit" inflation. Brazil
hit 30 - 50+% per month. Over 3000% per year.
Zimbabwe has managed to exceed that record.
We're talking about wheelbarrows of worthless money to buy a loaf of
bread. Don't think we aren't capable of doing it to ourselves.
Germany's leaders did it. There's a good reason why, despite their
many costly social programs, Germans still fear inflation. The
American generation which vividly remembers the Great Depression as
something more than a passage in a history book are fast disappearing
today. We need to listen to them. We need to recognize that
our federal government today has even greater power to create such an
economic disaster here, regardless of good intentions. They didn't
expect to create the Great Depression, either. They thought they
knew how to get themselves out of it in the New Deal. They didn't.
World War II finally forced them to end it.
We need to have a little more humility among our
elected leaders in Washington. They have the power to knock this
train off the rails, but they aren't the engine that drives it.
Math exercise #5 : Excessive federal
spending and foreign debt as a national security issue
Remember the $700+ billion which
T. Boone Pickens warned about as "the greatest transfer of
wealth in the history of America" to foreign countries? This was
to pay for our oil imports when it was around $140 per barrel. Of
course, a lot of our imported oil comes from Canada, so the amount which
comes from countries whose friendship is more dubious is limited, but I
digress.
Yes, the drop in the price of oil from
over $140 to around $40 per barrel has dramatically changed the total
which he original talked about. It's still a lot of money, and the
price will go up again. We can't really control when it will go
up, but when the global economy recovers, it will go up at some point.
If this federal "stimulus" package is to be believed as a solution, and
it actually works, then we will soon be back to spending those hundreds
of billions on foreign oil imports again.
We have a little time to work on that problem.
Yes, that spending certainly isn't sustainable either, but we the people
were the ones paying for that oil at our gas pumps and in our
businesses. Yes, there is merit to some of his arguments in favor
of natural gas, and to some degree wind energy, as well as some other
alternative domestic sources of energy. Yes, this is a serious
national security issue.
The point is that spending $1.5 trillion more is a more serious threat
today to our security. It is twice as large, and immediate.
It may not be forecast to happen again every year, but the federal
budget deficits are forecast to continue at the $1+ trillion for many
years.
In
the long run, the energy situation is not sustainable. We can't
afford this risk of crushing debts for imported oil every year, far into
the future, even though competing countries will also face those same
energy cost burdens on their own economic growth challenges..
In the short run, however, our federal spending is not
sustainable. That's the bigger threat. We cannot control the
global market price of oil. We can and must control government
spending.
Math exercise #6 : Stick this in your
financial calculator, if you can handle it.
Assume that the current federal external debt is still only $12 trillion
= present value PV.
Assume that we will have $1 trillion budget deficits (PMT) for at least
4 years (n).
Assume a historically reasonable interest rate for that federal debt.
Assume only 4% = i.
PV =
$12,000,000,000,000 initial debt
PMT =
$1,000,000,000,000 additional debt per year
i = 4% long term Treasury interest rate
n = 4 years - next Presidential election cycle
Solve for future value FV at the end of 4 years.
The $12 trillion foreign debt today grows to $18+
trillion.
That's $6 trillion more. (See
extra credit math, above - that's 1200 lunar round
trips)
That's a 50% increase in our foreign debt in just 4
years. It's bad enough already. (2400 lunar round trips,
plus these 1200 extra, in case you were slow at figuring this one out
for yourself)
That assumes foreigners are willing to buy $6
trillion more US Treasury debt at 4%.
If inflation rises, and that rate goes up to 5% or
6% or more, it quickly gets much worse.
Consider what long-term Treasury rates reached in the
Carter years, when the prime rate for corporate borrowers reached 20%,
not so very long ago.
Think about it. If inflation rises and the value
of the dollar gets weaker, foreign lenders will expect a higher rate of
return or else they will invest their money elsewhere rather than risk
losses on dollar investments. Of course, in a global recession
with other governments quickly spending themselves into debt too, there
may not be a lot of good options available to investors.
Although unemployment gradually went down under
Carter, inflation went way up. It is dangerous to assume that
creating more jobs at any price is the solution to our economic
problems. As a populist policy, it is politically appealing as
unemployment rises. It can be economic suicide, however. The
roots of this financial crisis (community lending initiatives through
Fannie Mae and Freddie Mac) were planted in the Carter era. This
is not the same as the S&L debacle, nor is it the same
as the Great Depression, but our liberal federal government is fully capable of
making it far worse than necessary.
As
the saying goes, "In the long run, we're all dead." Let's not
commit economic suicide today.
